Nifty futures, Asian indices flat in nervous trades

A nervous start to the trading day as investors weigh the prospects of an interest rate cut by the RBI in the wake of yesterday’s anaemic IIP data against concerns over lingering inflation at home — and a world of uncertainty in the eurozone.

As at 7.30 am IST, Nifty futures are trading absolutely flat, at about the same levels that they were after yesterday’s late-evening rally on hopes of a rate cut next week. Perhaps investors are getting a little ahead of themselves: inflation data due out tomorrow will likely cramp the elbow room that the RBI has to cut rates, although there is immense political pressure from the government for just such a cut. And, as we’d noted, a rate cut now may actually compound the economic mess and prolong the agony induced by the structural failings, but markets like quick fixes.

Elsewhere across the region too, indices are trading flat or in a very narrow range, evidently not drawing any comfort from a late burst on Wall Street overnight. That rally in turn was driven by unverified reports that central banks around the world would take coordinated action to ease monetary policy. All three leading indices on Wall Street finished up in excess of 1 percent, but there is an undercurrent of nervousness about how exactly things will pan out in Europe, given that even the latest Spanish bailout is fraying at the edges. The rating agency Fitch downgraded 18 Spanish banks, and all eyes are fixed on the upcoming Greek elections over the weekend.

Back home, the chatter about an interest rate cut is growing in intensity, but beyond the near term, Crisil Research says it sees Nifty at 5500 by March 2013. Global fund managers, however, remain extremely risk-averse and scaling back their exposure to emerging markets.

Overall, we’re probably looking at a tame start to the trading day, in line with the undercurrent of nervousness across markets across Asia.

(curtsey : first post)

Rupesh Yatesh Dalal
Head Research Department

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