Markets Seeking Cues - Likely To Open On A Flat Note

Indian equity markets managed to sustain higher levels on Friday as Infosys financial performance was according to the street estimates. As expected the IT companies helped the leading indices sustain the elevated levels. However the scenario seems to have changed as the macro data figures have been quite negative. First and the foremost has been the announcement of IIP growth figures for the month of August 2013 stood at just 0.60 %. This has been very much lower than the street estimates of more than 3 %. As the numbers were announced after the markets hours the impact of the same is likely to be seen today. Now many on the street may expect that the lower IIP could lead the RBI to stop its tightening activity. However we are of the opinion that, it totally depends on how the September CPI and WPI numbers pan out. The CPI and WPI numbers will be announced today. If the WPI figures expand, it would impact the markets negatively. The simple reason being, RBI has clearly suggested that, interest rates would not be reduced unless and until the inflation is tamed.

While this was the scenario on domestic front, the global cues are also not very strong. The first negative news flow was, World Bank chief Jim Yong Kim warned that the United States was headed toward peril as politicians failed again to resolve a standoff over the budget and debt ceiling. The US and world economies face higher interest rates, falling confidence and slower growth if the US Congress does not raise the $16.7 trillion borrowing cap, Kim said. The US Treasury has said that it would run out of adequate cash to pay all the country's b/ills as early as October 17 without a debt cap increase. That has sparked worries that Washington could default on its debt, something that would rock the world's financial markets.

Apart from that, the China Exports unexpectedly fell in September2013 signaling the constraints of global demand on the nation’s recovery and highlighting distortions caused by fake invoices that have yet to be eliminated from trade data. Overseas shipments dropped 0.3 percent from a year earlier. The trade report may add to Premier Li Keqiang’s challenges in defending the government’s 7.5 percent expansion goal for this year.

While US and European markets closed in green on Friday, the Impact of the negative news flow in the past two days is clearly seen with leading Asian Indices witnessing s decline. Straits Times is down marginally (0.31%) along with Taiwan Index down 0.83 % and KOSPI down 0.04%.

Evening the SGX Nifty is trading at 6095 (down 18 points) witnessing a decline of 0.20%. So we expect the Indian equity markets to open on negative note. But the CPI and WPI numbers would guide the session afterwards.