Expect A Negative Opening And A Range Bound Trade

After witnessing a continuous rally for two trading session markets took a breather yesterday. Rather it was sort of a consolidation witnessed in the markets as the participants were quite cautious after a strong up move in the markets.

There are various factors that have actually helped the Indian equity markets sustain the higher levels. First and the foremost has been the appreciation of INR against the USD. In the last few days the INR which had started depreciating against the USD managed to regain some ground on the back of solace being provided by the RBI Governor. Apart from that the other global factors like reforms from the Chinese government, delay in QE taper leading to the higher inflow of FIIs and last but not the least the expectations of Narendra Modi led government at Centre in the upcoming general elections have helped the markets to keep its up-ward momentum alive.

While this has been the story on the domestic front, on the global front also there is some positive news flow. Federal Reserve Chairman Ben S. Bernanke said the labor market has shown “meaningful improvement” since the start of the central bank’s bond-buying program and that the benchmark interest rate will probably stay low long after the purchases end. As a result Asian stocks swung between gains and losses.

As regards the performance of global equity indices yesterday, US markets closed marginally in red amid a quiet trading session on account of awaited cues from US Fed on the QE taper front. Dow closed in red with miniscule losses of 0.06%. European markets however witnessed some amount of profit booking on account of some caution.

As for the Asian Indices all the leading indices are trading with marginal gains.  Nikkei is up 0.11% and Shanghai Composite is up 0.38%. Even Hang Seng is trading in positive zone with gains of 0.34%. SGX Nifty is trading at 6221 (Down 0.21%).

On the domestic front there are few positives on the long term basis. Indian markets are going up because Narendra Modi is going into national elections. CLSA stated in a report stated that, whether people get this right or wrong, there's a sentiment about it. Corporate India expects investment-driven growth to government's prioritising various forms of rural benefit schemes. The opinion poll suggests that 90% of Indian corporate prefer the Opposition party. The private sector businessman supports the current Opposition party.

However with no immediate triggers available in near term, we expect a range bound trade for the Indian equities. We expect a negative opening for the markets.