Nifty futures flat ahead of factory data; Asian indices up

Hong Kong: After yesterday’s heroic claw-back, when the Indian markets came back from the dead to finish marginally ahead, today looks like it will be pretty tame.

No heart-stopping plunges, no adrenaline-driven pullbacks seem in store, going by early trades on the Nifty futures. As at 7.30 am IST, Nifty futures are up marginally, about one-tenths of 1 percent; trading so far has been fairly range-bound to the point of being boring. Markets are evidently waiting for cues from manufacturing data for May, due out in India today. Given the rotten streak of numbers we’ve seen in recent times,

Elsewhere in the Asia-Pacific region, we’re seeing a more robust recovery after yesterday’s sharp falls. This morning, Hong Kong’s Hang Seng Index is up in excess of 1 percent; Sydney’s S&P ASX is the outperformer, up nearly 1.5 percent in anticipation of an interest rate cut; Tokyo’s Nikkei, and Shanghai too are up by healthy margins, to complete a picture of green trading boards every where.

Listen to audio

What’s driving sentiment for the day? Finance ministers and central bank officials from the Group of 7 economies are to meet later today, and analysts expect some kind of coordinated action on Europe, which could trigger the risk-on trade, even if only for a day. But until the Greek elections of 17 June, investors’ nerves are bound to be jumpy as hell, given that so much is riding on that verdict.

Overnight, Wall Street had a mixed day on tepid economic data, with the Dow Jones index finishing down a tick, the S&P 500 finishing flat, and the Nasdaq up about one-half of 1 percent. Sentiment was fairly evenly driven by the weakness of the economic fundamentals - and the likely policy response to it, perhaps in the form of some stimulus.

The dollar index too is weaker today, which should augur well for the rupee.

Back home, yesterday’s market recovery was driven in large part by comments from the RBI Deputy Governor that most analysts have interpreted as a signal that interest rates will be lowered. But not everyone is convinced that that is a correct reading of his remarks.

CLSA economist Rajeev Malik reckons that much of the analysis has missed out on the nuance in Subir Gokarn’s comments: “Gokarn’s comments were much more balanced, indicating factors that offer more “elbow room” (for lowering rates) and those that work against more easing. But the majority of news reports have conveniently taken only the first part,” says Malik.

In Malik’s estimation, while the probability of the RBI easing rates on 18 June has probably increased, there are factors that go against the logic of a rate cut as well. In any case, he adds,a rate cut won’t solve anything - the last 50 basis point cut has done little - but could create more problems for domestic liquidity management.

In that sense, the market may be setting itself up for a bit of disappointment with its excessive expectation of a rate cut.

For today, though, we’ll probably see a tame start to trading, with markets taking their cues from the manufacturing data.