A Flat To Negative Open And A Volatile Day Ahead

Where do we start today? Interesting question, isn’t it? What do you make of a market where the Sensex opens down 116 points, wobbles vigorously, hitting a high which is 133 points up from the previous close and 250 points above its days open and a low which is 519 points below its previous close and 402 points below its days open and finally closes 28 points above its previous close and 144 points from where it had opened the day. I am sure most of you would find this statement to be pretty long and winding. But the reason I put it that way is to give you a sense of the volatility in the markets.

How did the market that began on such a dull not end in the positive? Well, as always there are talks of LICs instrumentality in pulling up the markets from the dumps. Massive buying by the state owned institution is reported to have helped the markets up in the latter half of the day.

Meanwhile, the rupee continued with its journey downhill. There seems to be no end to this discussion about why the rupee is losing value so rapidly. In fact, as of now, the way the currency opens its day is even more interesting than the opening bell of the equity markets. The situation which was already grim has become even more serious now. As if all that was happening wasn’t enough, crude prices are on an up trend. In fact, up trend would seem to be an understatement of what is being witnessed out there. The US-Syrian war threat is looming large and that is currently the biggest worry for global markets.

The impact of the geopolitical tension is being witnessed across the globe. European markets faced the fall out of the Syrian crisis for the third straight session. The sentiment for markets across the European region has been riding on global developments particularly in the US. The unsettling impact of the war talk is hence impacting its market over the past couple of days more than any other part of the world.

In the US itself, though the worries over the Syrian attack loom large, riding crude prices have helped the markets gain strength yesterday. Reportedly, oil producers saw their stocks rise, thereby leading to an overall positive close to the markets yesterday. The Dow rose 48 points to 14825, while the S&P 500 was up 5 points on close at 1635.

The Asian markets are somewhat mirroring what happened in the US last evening. Riding on the rise in oil producing company stocks, markets are witnessing a good rebound from the lower levels. Korea was leading the Asian pack with the Seoul Composite trading 1.19% above its previous close, followed closely by Singapore where the Straits Times was trading up 0.78%. Japan, Malaysia, Taiwan, Indonesia, Hong Kong and China were all in the green until the time of this report.

Back home, the RBI continues to fix the rupees’ slide by initiating measures as and where it can. But is all this too little too late? The Rupee has breached many sensitive levels and is poised to hit the Rs 70 level very soon. There is nothing that can help the rupee gain strength. Most of the factors that are behind the rupees’ decline are still the same out there. The Fed taper is expected to start anywhere end of September while rising crude prices is another big problem as of today.

In all these circumstances, there is no hope for the markets to bounce back in a major way as such. Yes that typical forced return to positivity could be seen as the government tries sooth frayed nerves. Today marks the F&O expiry. Volatility will hence be a norm. We could see a rather insipid start to the market, possibly on the negative side and a very subdued trade for the day. A word of caution; stay away from ambitious and avaricious trades.