It's Red Again

Indian markets literally shrugged the impact of US Shut down and witnessed a sharp bounce back yesterday. With positive news flow like better than expected CAD figures and good growth in core sector the Indian equity indices managed to put in a better show. Apart from that what added to the confidence of the investor fraternity was the statement of finance minister who stated that the India could contain its CAD for FY14 to the tune of USD 70 billion, a target set by the Government. He further stated that, as for the economic growth the second half of the FY14 is going to be better than the first half of FY14. Apart From that the SEBI would be taking steps to attract more retail investors into the stock market besides charting out the operational framework for Foreign Institutional Investors (FIIs) as per suggestions made by the high-level Chandrasekhar committee. This provided some amount of solace to the Indian investors. Another reason behind the up-move was the FII’s flocking in to Indian markets yet again. There has been good amount of FII inflow after the announcement of postponement of the QE tapering.

So, on the domestic front the news flow has been positive helping the equity indices move upwards. But the global factors do not seem to be that much supportive. In the US markets stocks declined broadly yesterday, as investors weighed the consequences of an extended government shutdown after a budget deal remained elusive in Washington. In addition to that another report yesterday jobless claims rose to 308,000 in the week ended September 28th, from a revised 307,000. As a result the DOW declined by around 0.91 %. Even the European markets finished lower following U.S. markets despite upbeat data out of the euro zone. Markit's composite purchasing managers index for the 17-nation currency bloc rose to 52.2 in September, the highest reading in more than two years, while retail sales for August rose slightly more than expected. 

Most of the Asian markets are also trading in red as concern grew that the U.S. political impasse could lead to the government defaulting on its debt, sparking a recession. It seems that creeping worries about the U.S. debt ceiling are starting to unnerve investors. In addition Standard & Poor’s Ratings Services warned Thursday of a threat to the region’s financial stability from a credit and debt bubble in China. In a downbeat look at Asia’s banking system, the ratings firm said slower economic growth in China could fuel a spike in bad loans even as the shadow banking sector continues to expand.

So the cues from the global markets are quite negative which will impact the Indian indices also. Even the SGX Nifty is trading down by 26 points at 5944.So considering the news flow from the global markets, we will not be surprised if Indian equity indices witness a gap down opening.