The Sentiment Isn’t Too Good

Welcome back to a fresh new trading week. Well, it surely does not look to be a very good way of greeting investors to a new week, especially since lakhs of crores have been wiped out of investors wealth following the carnage that beset the market towards the end of the preceding week. A decline of 700 plus points on the Sensex is not something that the market witnesses very often. It obviously means the worst for the markets. News flows from all quarters have been such, that there is no other way for the markets to look at than down.

From a US recovery which spooked markets worldwide with fears of the bond buying taper by the Federal Reserve attaining centre stage once again, to our own domestic macro and systemic worries the past week has been the most challenging for the markets so far this year. A scenario which looked like we were heading toward the same crisis as we had in 1991 sent tremors down the markets’ spine. Though the Prime Minister has gone on record to quell these fears, there is little to believe unless the situation on the ground really improves.

A declining rupee and a worsening CAD have been the central factors of worry for almost all quarters of the economy. Every measure initiated to control the deteriorating Rupee has so far failed to deliver results. The frustration over not being able to control a falling rupee seems to be now coming out of the closed doors of the power corridor and spilling on to the streets. The tiff between the outgoing RBI governor D Subbarao and the Finance Minister, P Chidambaram over the prerogatives of the both the institutions continues unabated. How does it matter, who does it? After all, isn’t getting it done important? Economic growth has been faltering and that is what matters at the end of the day. Fixing it calls for a concerted effort from the government as well as the RBI.

With all this mess at the centre stage, what should you expect the markets to do this week? Global cues aren’t too encouraging for the markets this week. Rising bond yields suggest that interest rates are bound to rise in the US. This means, a further fall for equity markets there. It has been one of the worst weeks for the US markets with the Dow losing more than 300 points (2%) last week. The S&P 500 declined by 36 points over the week which is biggest weekly point fall for the year 2013. The tech-laden Nasdaq saw a 1.6% erosion over the week. This has been the second straight week of decline for the frontline indices in the US. Europe has been following the US very closely and despite growth picking up in the Euro zone stocks have been rising only cautiously.

Closer home, Asian markets have not had a good beginning to the week. All without exception are trading in the red. The Federal Reserves’ moves to come are the core of their worries. The situation is not likely to improve unless some clarity emerges on that front.  China, Hong Kong, Japan, Indonesia, Malaysia and Korea are all witnessing selling pressures this morning. Singapore has been trending on the borderlines but the weight is largely on the negative side.

All the above points to a weaker start for the Indian markets this week. The sentiment on the street is largely marred by macro worries. The Government has been frantically trying to open new gates of foreign inflows but that will take some time to yield results. The immediate impact on the markets of these announcements is likely o be minimal. The markets are likely to trade with a negative bias for the day and continue to do so for the rest of the week.