RBI Provides Solace – Expect A Positive Opening

Indian markets witnessed another weak trading session yesterday as the indices closed in red with significant losses. It was a consecutive seventh trading session where the equity indices closed in red. This seems to be one of the weakest seasons for the markets as the selling has persisted for continuously seven trading sessions.

While the trading session remained quite volatile there was good amount of activity that happened post the trading session as the Governor organized a press meet. Quite a few positive data points were provided here, first and the foremost being improvement on the most worried factor called CAD. According to the estimates the RBI expects the CAD at around USD 56 billion which is significantly lower than the earlier target and estimates of around USD 70 billion. He further mentioned that the import curbs on the Gold are working and hence it would be possible to control the CAD. In the statement the Governor also stated that there would be no problem in finding dollars to fund the CAD as the FII inflow has been good and consistent. Further even if the FII flow out of Indian markets he CAD can be funded easily. The best part was that, all these developments resulted in strengthening of Rupee against the USD. So we feel all the factors would provide some positive impetus to the Indian equity markets today.

On the global front also the cues are quite positive with US Markets closing in green and even the Asian markets trading with significant gains. While DJIA closed at 15821 (Up 0.45%) Nikkei is trading up by more than 1%. Even Hang Seng is up by half a percentage point. Only Shanghai Composite is marginally down by 0.06%. The Bloomberg reported that, Asian stocks rose, while precious metals climbed and the dollar slipped versus most major peers after Federal Reserve chairman nominee Janet Yellen said the U.S. economy must improve before stimulus cuts. The Bloomberg survey also indicated that the Federal Open Market Committee will probably taper its bond buying to $70 billion at its March 18-19 meeting, according to the median of 32 economist estimates.

As regards the markets today, the positive cues from the domestic as well as global Markets would help the indices open with gains. However we still feel that profit booking will continue keeping the indices under check. SGX Nifty is trading at 6069 up by 37 points.