Nifty futures, Asian indices fall on eurozone downgrades

Hong Kong: A rotten and volatile start to the trading week as markets in Asia absorb the shocker on Friday from rating agency Standard & Poor’s, which downgraded nine eurozone economies.

Even though the rating action was anticipated, it validated concerns about the gravity of the problems in the Eurozone. It didn’t help sentiment that S&P’s continues to maintain a negative outlook on many of these economies, suggesting that more downgrades may be likely in the months ahead.

To the extent that these downgrades increase the heavily indebted countries’ borrowing costs even further, their problems will likely be compounded - which could trigger risk aversion and add to volatility.

We’re already seeing that volatility in trading this morning.

Nifty futures opened with a sharp fall - in excess of 1 percent. As at 7.30 am IST, they’re coming off that low, but are still trading down at about the 4840 range.

All across the Asia-Pacific region, indices are down by between 0.2 percent (that’s Shanghai) and a rather more steep 1.6 percent (that’s Tokyo). Again, most of these markets are coming off their lows from earlier in the day.

All the global cues points to a weak start to trading in India today, more than reversing the gains made on Friday. But until markets fully digest the news out of eurozone - there’s an ongoing debt deal negotiations in Greece that bears watching - they will likely be volatile.

Friday’s rally in the Indian market came after a rebound in IIP data, and on the strength of the hope that a rate hike will likely come about soon. But again, fund managers’ outlook continues to remain downbeat: a poll conducted by Economic Times has them predicting a plunge in the Sensex to as low as 13,000 by 31 March.

Given that kind of an outlook, and the generally downbeat sentiment today, we’ll likely see a weak opening and a day of volatile trading.