With nothing to guide the markets on the domestic front, the global situation and indications will be in focus this morning. All in all, global cues aren’t looking good for today. The Indian markets are likely to react to the Fed minutes in a not so kind manner. The SGX Nifty is already indicating the mood which could see a depressed start and a negatively biased trading day. To repeat the caveat, be cautious in taking big bets, as this is the way it’s going to be at least for the next three months.
Making a judgement on a market which lacks triggers is the most difficult thing to do. You never know which way they would swerve at what point of time. The past couple of days stand testimony to this. After a flat opening following global cues, the Indian markets have traded in a quite band and ended in the green.
Major events which could have impacted the market and decided its course are behind us. The reason to say ‘could have’ is quite obvious. All those events, whether corporate results for the December quarter or the interim budget presented just a couple of days ago have turned out to be non-events from the market perspective.
On the other hand, global cues have been more instrumental in shaping the short term trend and behavior of the markets. Economic data points emerging from various parts of the world have been read more interestingly by investors. Accordingly, economic growth in the European region has been a welcome point while Chinese trade data and other economic data points have been a cause of worry. Continuing with the same bend of mind, it was waiting with baited breadth for the Fed meeting minutes to be released yesterday.
The Fed meeting minutes which were released yesterday clearly bring out one point in the open. The stimulus program which is currently acting as a major crutch for the market is all but set to taper down gradually going forward. There are many conflicting views on what levels of employment need to be achieved before the taper could be accelerated or for that matter what could really mean a turnaround in the fortunes of the US economy. But all said and done, members are clearly in favour of tapering the bond buying exercise. The second important point which comes as a natural consequence of the first one is about what happens to interest rates. Interest rates going up would mean a doubling of the negative impact.
Now that does not really bode well, especially for emerging markets. Despite the fact that the initial fear and panic has already been priced in, every new talk of the taper until it zeroes out is surely going to impact the psyche of the markets. Add to this rising interest rates in the US and you would certainly see at least a partial flight to quality of the USD thereby creating a larger impact on the Indian markets. The second factor (rising interest rates) are like a double edged sword. On one hand they would shake up the markets and on the other a higher dollar against the rupee would mean a pressure on government finances.
In a surprise move, European markets brushed aside economic data emerging from its own shores as also the Fed minutes to close the day positively. Unemployment in UK was seen to be higher than expected. From 7.1% in November it inched up to 7.2% in December. However, US stocks closed lower after the minutes revealed little agreement among members on when short-term rates would begin to rise. The S&P 500 declined 0.65% after having gone up consistently for the past three days. It was 12.01 points down at 1828.75 on close. The Dow declined by 0.56% in a very volatile session, ending 89.84 points, or 0.6%, lower at 16040.56.
Economic data released in the Asian region has been very pessimistic this morning. Japans trade deficit has widened missing analyst expectations. Exports rose 9.5%, which isn’t really a poor figure, but it was below the 12.5% rise expected by analysts and that spooked the markets. The Nikkei is currently trading 1.25% below its yesterday’s close. None of the other markets except for Singapore and China are trading in the green. The Hang Seng in Hong Kong is trading down 1.39% following Chinese PMI data. However, the Shanghai Composite in China is per se trading up by half a percent. Singapore which was initially trading in the green has slipped below the dotted line while the SGX Nifty is trading way below having lost 45 points by now.
With nothing to guide the markets on the domestic front, the global situation and indications will be in focus this morning. All in all, global cues aren’t looking good for today. The Indian markets are likely to react to the Fed minutes in a not so kind manner. The SGX Nifty is already indicating the mood which could see a depressed start and a negatively biased trading day. To repeat the caveat, be cautious in taking big bets, as this is the way it’s going to be at least for the next three months.
