Rating agencies have not reacted negatively to bigger govt deficit so far
More stimulus is being discussed across the globe
India has started refocusing its attention on reopening economy and stopping economic slide
The expected stimulus from India Government looks insufficient to kick start the frozen economy
Federal reserve officials in US are pouring cold water on expectations of negative interest rates in US
Global Markets: - Sideways grind continues
Global markets started the week on the positive note however, they seem to be going nowhere. They are currently on directionless sideways coil. The talk of bigger stimulus seems to just hold the markets from falling off. Goldman Sachs a reputed investment bank expects next leg of down move that will send stocks lower by 18% from current levels. Few Federal reserve officials have quickly doused expectations of negative interest rate in US. This is sending dollar index higher. The gold is consolidating at higher level while copper is taking a breather after recent bull back
ASIAN Markets this morning: -Directionless with negative bias.
Markets are trading sideways this morning with negative bias. Although SGX Nifty is trading lower by about100 points from yesterday close, it is still staying within the tight range the index is in for the past week.
Trade deficit numbers may actually improve due to crude oil price collapse and lessor imports. Industrial production and consumer price inflation numbers will be out tomorrow. India’s industrial output is estimated to fall by 8.7%. Consumer price inflation is expected to fall to 5.68% Vs 5.91%
India: Higher Govt borrowing but that is not sufficient to kick start the economy
There are fears that Indian Government’s increased borrowing may not be sufficient to fund the sizable stimulus that can kick start the economy. There are also opinions from economist and ex- RBI governors that deficit could be much higher than 5.3-5.5% range. That is because economy is expected to shrink this year. Therefore, in percentage terms the deficit of 12 lakh crores will work out much higher than the projected 5.3-5.5%
Yield on India government bonds are raising across the spectrum because of higher deficit numbers (Bond values are falling). This will first increase the cost of government borrowing and second, as the government of India borrows all the money from the market, private sector will be left with no opportunity to borrow or fund its requirement.
Havells will declare results today. Godrej consumer products will declare their quarterly numbers on tomorrow.
NIFTY -Technical Bias: Price Action & Pattern:
Nifty has been consolidating for few days with negative bias. This was expected to change yesterday as global markets opened on positive note. However, by end of yesterday, Nifty gave up all gains and settled almost unchanged from previous close. Therefore, it seems sideways grind will continue for today with negative bias. However, the implied volatility continues to taper off.
Directional traders need to wait for a range break while spread traders could go for diagonal spread that will benefit from ranging market. At the moment implied volatility seems to be stable. Directional spread could be adversely affected if implied volatility falls off quickly. That needs to be kept in mind.