Headline inflation numbers and the RBI’s policy review will be closely watched by investors
The local market is likely to open with a gap-down opening on concerns about the possibility of the Reserve Bank of India hiking interest rates by 25 basis points in its policy review later this week and the slowdown across the world. Markets in Asia were down in early trade on Monday on dismal economic news across the region and Wall Street tumbled nearly 1.5% on Friday as slowdown in the country’s hurt investor sentiment. The SGX Nifty was at 5,460, down 25.50 points from its previous close of 5,485.50.
Dismal economic news from the domestic arena and disturbing signals globally resulted in the market closing with a 1% cut last week. Investors will be focused on the Reserve Bank of India's mid-quarter policy review on Thursday, as it weighs another possible rate hike to combat stubborn inflation and the pace of economic growth slows.
The market closed with modest gains on the first two trading days. However, adverse comments by US Federal Reserve chief Ben Bernanke dragged the market sharply lower on Wednesday. The indices settled flat on Thursday, but a steep decline in industrial output for April forced a deep cut on Friday.
Overall, the Sensex lost 108 points to close the week at 18,269 and the Nifty settled 31 points down at 5,486. The market has closed negative for three of the past four weeks. It is witnessing a downtrend with the first support on the Nifty at 5,415. If it breaches this level, the market may fall to around 5,350.
The weakening trend from the US markets on Friday and not-so-good economic news from countries across Asia led to a lower opening for markets across the region. Japan’s machinery orders fell for the first time in four months in April. Factory orders declined 3.3% in April from a 1% rise in March. Analysts had projected an increase of 1.7%. Realty shares in Hong Kong traded lower after the Kong Monetary Authority on 10th June said buyers of homes costing more than HK$6 million ($770,000) will have to increase up-front payments.
The Shanghai Composite sank 1.22%, the Hang Seng declined 0.82%, the Jakarta Composite fell 0.36%, the KLSE Composite was down 0.40%, the Nikkei 225 retraced 0.77%, the Straits Times contracted 0.47% and the Taiwan Weighted was down 0.39%. Bucking the trend, the Seoul Composite was trading 0.40% higher in early trade.
The US markets ended with deep cuts on Friday as the Federal Reserve has failed to outline a new stimulus plan after the $600 billion bond-buying QE2 comes to an end this month. Though there was no particular reason for the decline, fears of the slowing pace of the global recovery weighed on investors. Financials made a late-session comeback after news that extra capital charge on the biggest banks is likely to be at 2% to 2.5%, instead of the widely-reported 3%.
The Dow tumbled 172.45 points (1.42%) to end at 11,951.91—below the 12,000-mark, the first time since 18 March 2011. The fall also marked the Dow’s longest stretch of decline since 2002. The S&P 500 declined 18.02 points (1.40%) to 1,270.98, its lowest level since 16th March. The Nasdaq skidded 41.14 points (1.53%) to close at 2,643.73, wiping out its yearly gains.
Back home, Maruti Suzuki India on Sunday said it is willing to recognise the new union—the main demand of the workers. The workers also said they are willing to end the stir provided 11 of their sacked colleagues are reinstated. The development is seen as the first signs of a resolution to the over week-long strike at its Manesar plant.
The company, however, was silent on the demand for reinstating the sacked workers, although sources said it was unlikely that they would be taken back.