A Weak Opening and a Bogged Down Day Ahead

The government seems to be now getting more serious on controlling the fiscal situation. In a bid to stem the rapidly declining rupee, it has yet again raised import duty on gold. Not only that, it intends to hike import duty on other non-essential commodities as well. Sounds good for the markets; at least that is what comes out from the way stocks rose in yesterdays trades. How much will this really help in terms of containing the slide of the rupee, or rather the overall macro scenario, will be clear only once we see it working on the ground. Bridging the fiscal deficit is no mean task. It is one of the biggest worries for the government and eventually the markets, in the present economic circumstances.

Economic indicators as it is, have been pointing towards a very uncomfortable situation. The WPI numbers are to be released today. Market expectations on this front too are not very great. That could be an obvious, given the way things have been shaping up of recent. With this entire melee on the macro issues front, the last thing that the market would want is a systemic problem within its apparatus. But unfortunately, that is exactly what is happening.

NSEL’s debacle is surely going to haunt the markets in the near future. From the quantum and size of scams that India is accustomed to, the amount of Rs 5000 odd crore may seem rather manageable to digest. But the larger worry is about the confidence shattering impact that is being seen following what has happened at NSEL. Investors and brokers are largely baying for the government to step in and take over the reins of the promoters of NSEL (Read FT). This is a problem, which if not resolved could lead to a loss of confidence and a big sentiment dampener. Today could be decisive, as far as this issue goes.

Meanwhile, a 0.2% rise in retail sales in the month of July after these were up 0.6% in June came in handy for the US markets yesterday. According to reports, retails sales excluding cars, gasoline and building materials rose at their fastest speed in the last seven months. The Dow ended the day up 31.33 points, or 0.2% at 15451.01.

Earlier in the day, European markets ended yet another day on the greener side. Economic data points emerging from Germany and UK helped the markets up for the fourth consecutive day. While the German business confidence was up scaling a five-month high in August, demand for homes in the UK was seen to be steadily rising.

Closer home, the Asian markets are trading fairly positive this morning. except for Taiwan all others are currently marginally in the green. it could be either ways depending on news flows going forward. The SGX Nifty is trading 18 points below its yesterdays close.

So where does all this take the Indian markets today? Not a very great day to start with. Sentimentally the markets seem to be on a weaker side weighed down by macro data points. WPI inflation numbers could act against the markets while global cues especially from Asian peers seem to be rather mixed. All in all, a weak opening on the negative side followed by a cautious day of trade is on the cards today.