A Positive Open And A Fairly Calmer Day Ahead

Finally, some respite. The markets snapped their four day losing streak yesterday, closing well in the green. Benchmark indices ended up more than 2% in what began as a fairly weak day but progressed well ignoring the noise around the falling rupee. That is probably one good thing to have happened yesterday. The rupee continues to dig deeper trying to find its way into the ground even as the government and the RBI try to do all that they can to stem the fall.

Are the worries of the market over? Will it be time now for a bounce back from the lower levels that have been hit over the past two trading weeks? Well, there is limited room for rejoicing yesterday’s market action. There is a new concern that will come to haunt the markets today – a possible sovereign downgrade by rating agencies.

In a statement released on Thursday, Fitch has warned if a possible rating downgrade citing the problem of external imbalances and the difficulties in funding it, particularly due to the outflow of portfolio capital.

Liquidity has come to be the biggest worry of the markets over the past two weeks as the possibility of the Fed cutting its bond purchases became more certain. Growth is gradually coming back to the developing markets, particularly the US and hence the probability of the Fed bringing down its bond purchases. The result of this has been a massive flight of capital from emerging markets back to the US.

Amid all the gloom that has been surrounding the markets of recent; the PMI numbers that began flowing in yesterday have come as a fresh whiff of positive air. Europe came back from three straight days of losses to end the day in the green as manufacturing activity was seen picking steam not only in the European region. The additional fillip to the sentiment of the markets came from an improvement in the Chinese manufacturing activity.

US markets too came back to end in the green after having seen six straight loss making trading sessions. A technical snag in the technology laden Nasdaq forced a halt in trading there for almost three hours. The resumption of trading on the Nasdaq saw stocks inch higher later.

Near to home, it has been quite some time that we have seen Asian markets open and trade in the green. that is happening today. Cues from Europe and the US have pushed Asian markets up this morning with all major indices trading in the green. Led by Japan all markets including Taiwan, Korea, Malaysia, Indonesia, Hong Kong and China are trading well in the green. Following its peers the Singapore market too is trading up by a quarter of a percent, while the SGX Nifty is marginally up trading 3 points above its yesterday’s close.

In almost 6 trading sessions over the past week or more, today the markets look poised to open on a positive note. There could be a follow up rally on the bourses, carrying forward yesterday’s positive sentiment. But remember, the woes surrounding the market have yet not gone away. There is no point in getting euphoric and taking bigger bets. The downgrade fear lurches out there and it could subdue the positivity to some extent.