Markets To Remain Edgy

Preceding week was highly volatile for the Indian markets. It was anyway expected with September month F& O contract expiry. And if the current macro factors are anything to go by Indian markets are likely to remain under pressure this week also. The Nifty slipped below its 200-day moving average support level of 5840 on Friday. Besides, the build-up of short positions in banking shares in the future and options (F&O) segment is also likely to weigh in on the markets this week. Apart from that what has added to the worries is, the comments from the RBI Governor stating that the inflation is still higher than tolerance levels. With his focus to curb the inflation market participants are expecting another round of liquidity tightening.

While this is the situation on domestic front, hardly anything positive is seen on the global canvass also. Globally, the US debt ceiling issue will keep global markets, including India, on the edge in the days ahead. The impact of the same was visible with already US markets declining on Friday with the S&P 500 and Dow posting their first weekly drop in past four weeks. The reason being, Democrat and Republican lawmakers struggled to agree on an emergency funding bill to avert an US government shutdown day away. 

Impact of the same can be seen on other Asian markets as well. Nikkei is trading in red with significant losses of more than 2 %. Hang Seng is also down more than 1 %. Only Shanghai Composite is marginally up in green. We feel, along with its Asian peers the Indian equity market will also keep its eyes glued to the US debt ceiling developments. Markets in the coming days are likely to be governed by global developments, particularly with respect to the US debt ceiling issue and the consequences in the event of political parties failing to agree upon enhancing the federal debt ceiling. 

The sentiments have turned bearish after the RBI Governor surprised the street by raising key policy rates by 25 basis points. Apart from that the June quarter current account deficit (CAD) and balance of payments data is expected to be released early this week. The market will also track the automobile sales data for September which will be released tomorrow.

As regards the markets today, expect another gap down opening for Sensex and Nifty.