Global Markets Cautious Ahead Of FOMC Meet Scheduled Next Week

Indian equity Indices took a sort of breather yesterday as the leading indices witnessed a decline after continuous up-move in the past few trading sessions. Though initially the market started in a positive zone taking cues from the Asian peers, profit booking pushed the indices in red. Investors paused for thought in the wake of the market’s recent strong run not only on the domestic front but also on the global front.

There still seems to be some uncertainty in the minds of investors ahead of the FOMC meet scheduled next week. Everyone seems to be getting cautious ahead of the same and hence is unlikely to any bold step to take hefty position. At current levels investors await the outcome of a Federal Reserve meeting next week along with outcome in Case of Syria as Russia and USA hold talks. No wonder the US markets closed in red with marginal losses. Similar was the case with European markets also. As a result most of the leading equity indices in Asia are trading in red. Hang Seng is down 0.35 %, Shanghai is down 0.20 % and Nikkei is also trading in red with miniscule losses. So there are hardly any positive indicators on the global front.

On the domestic front however the index for industrial production (IIP) numbers were announced yesterday after the market hours. Industrial output which is measured by the IIP rose 2.60 % for the month of July. This was highest since March 2013. The IIP numbers were way ahead of the street estimates of 0.8 to 1 %. Apart from the retail inflation for the month of August 2013 contracted marginally to 9.52 % from the levels of 9.64% in July 2013. The numbers are encouraging, but we cannot call it as a turnaround. This numbers are critical ahead of the RBI Meet for mid quarter review scheduled on 20th September. The new Governor joining is going to focus on retail inflation rather the WPI.

As regards the markets today, we feel the markets are likely to remain choppy ahead of the FOMC meet and RBI meet scheduled next week. We expect the profit booking to continue today also. The better than expected IIP and contraction of retail inflation may help the markets to open in positive. But profit booking may take the markets in negative territory. Even SGX Nifty is trading at 5855 (Down 15 points) and hence we are expecting a flat opening for the Indian markets.