Markets likely to open flat following subdued global cues

Going by the early trends in SGX Nifty, the markets are expected to open on a flat note as cues from Asian peers are subdued. Also, the Wall Street closed on a weak note overnight as the spread between 2-year and 10-year US treasury yields are below zero, an occurrence that is preceded each of the last seven recessions. At the time of writing, SGX Nifty was trading up by 6 points at 11,116 level. However, we expect the markets to take a breather after a strong rally seen in the last three trading sessions from the recent lows. For the bulls, it is important to hold above the 10,980-11,000 levels.

Major Asian indices are trading mostly directionless on Wednesday after a widely watched US treasury yield curve inverted to its worst level in more than a decade. The Japanese stock index Nikkei 225 was marginally higher by 0.15 per cent, while Hong Kong’s Hang Seng was flat and China’s Shanghai Composite was down by 0.43 per cent.

Back home, key equity benchmark indices got off to a positive start but slipped into the red terrain for a very brief time. However, the indices stayed in the positive terrain for a major part of the trading session. The index was seen oscillating in a capped range and ended Tuesday’s session with decent gains. The Nifty added 0.43 per cent above the 11,100 mark and BSE Sensex rose 0.39 per cent to end at 37,641 level. The broader market indices outperformed the benchmarks, with Nifty Midcap and Smallcap ending with gains of 0.74 per cent and 1.80 per cent, respectively. Among the sectoral indices, except Nifty IT, Nifty Media and Nifty Pharma, all the other indices ended in the green, with Nifty PSU Bank and Nifty Metal emerging top gainers.

After having enjoyed a positive start on Tuesday, the US stocks pulled back well off their highs of the session into the negative terrain as sentiment turned negative with the gap between the 2-year and 10-year treasury yields widening to the worst level since 2007, fueling fears of an looming economic recession. In the end, the Dow shed 0.5 per cent, the S&P 500 fell 0.3 per cent and the Nasdaq dropped 0.3 per cent. 

A majority of the European indices ended Tuesday’s session in the green. Germany’s DAX and France’s CAC 40 added 0.62 per cent and 0.67 per cent, respectively, while UK’s FTSE 100 dipped 0.08 per cent.