Expect Stability After Uncertainty

Indian equity markets have been witnessing a very range bound movement in the past few trading sessions on intraday basis. Yesterday however the scenario was quite different as the Indices witnessed a fair bit of downward movement. However it was an expected movement as the way Jennet Yellen categorically mentioned about the possible reversal of interest rates after the six month of end of QE. In addition the USD 10 billion QE Taper in the recent policy meet was another shocker for most of the emerging markets as the excess liquidity would be taken out of the systems. It is a known fact that the emerging markets usually get stronger inflows of FII money if the liquidity is abundant.

If we take look at the Indian markets also, it is the FII inflow of more than Rs 9800 crore on the YTD basis in 2014 is the primary factor for markets staying afloat at near all time high levels. With domestic institutions being negative, it becomes all the more important that the FII inflows keep on folding the Indian equity markets. Now as the interest rates in US are likely to change and QE taper continues, the flows to emerging markets are likely to get curtailed.

The impact of the same was seen yesterday with most of the equity indices witnessing a decline and Asian indices leading the fall. However the scenario is quite different today. The Indices have bounced back all over the globe. To put the figures in perspective Dow yesterday closed at 16331 (Up 0.67%) and S&P 500 also closed in green with 0.60% gains. Even the European markets had witnessed a good recovery and closed marginally higher after opening with deep cuts.

The Asian markets are also now trading with significant gains. The Japanese markets are closed today. But the other Asian markets are looking in pretty good shape. It seems that the expected long term recovery in the US Markets is being taken positively. The Korean equity markets actually witnessed a sharp up-move after a long time. The KOSPI is trading with gains of more than 0.50%.  Hang Seng is also up 0.23 %, but the macro factors in China seems to weighing on the equity markets there. A set of poor macro factors in the past few weeks is keeping the indices under check. The Shanghai Composite is down marginally by 0.14%.

As for the Indian markets there no major factors on the macro front. However some of the micro factors seem to be making news. Infosys faced another big profile exit yesterday after the market hours. Yesterday Chandrashekhar Kakal resigned. He was the senior vice president and member of Infosys' executive council. Apart from that Dr. K C Chakrabarty (RBI Deputy Governor) resigned ahead of end of his tenure on personal grounds. We feel ahead of the important meet of RBI on April 1st 2014, his resignation is sort of a shocker for the markets. We have categorically stated in the past that, the RBI has to think level headedly now as Indian markets are at crucial juncture.

As for the Indian markets, the SGX Nifty is trading up by 26 points and we expect a similar kind of opening for indices. Yesterday we saw a good amount of profit booking. Now today one can expect some stability. However profit booking may continue to happen in few of the stocks that have appreciated in the past few trading sessions. Mid cap segment however may remain vibrant today.