Indian Markets recover on institutional support - Alex Mathews

After opening on a negative note, market got support at lower levels and by after the announcement of GDP number, the markets showed some strong move defying the weak GDP numbers to move into the green. Later we saw markets once again moving into red but strong institutional support helped the markets to gain back all the lost gains and close at the high of the day. The recovery in the later part of the day was on the back of the expectation that the slowing economy will prompt the central bank to reduce the interest rates in its upcoming mid quarter review scheduled on December 16th. The GDP numbers for the second quarter was at 6.9% against 7.7% previously while the manufacturing sector posted a meager growth of 2.7% as compared to 7.2% previously, mining sector posted a negative growth of -2.9% and construction activity posted a growth of 4.2%. Markets actually over looked the weak numbers and concentrated on the resultant reactive move from the RBI. Also after the market hours, China has cut the reserve ratio for banks by 50 basis points effective December 5th, for the first time since 2008 as the economy has recently shown signs of slow down. This move from China may convince our central bank also to consider a rate cut very soon.

The late recovery seen on Nifty and the rebound seen in the US futures are pointing to a positive opening for our markets tomorrow. As the reserve ratio cut in China happened after the market hours in China, it will certainly have a positive impact on the markets in China and as well as in our markets. Apart from that we may see some more consolidation in weekly inflation tomorrow. Nifty is having resistance at 4870, 4918 and 4950 while the support is there at 4800 and 4774 levels.

Asian markets are trading in red after S&P cuts Bank of America, Goldman Sachs and Citigroup's long term credit ratings to A- from a after it revised criteria for dozens of the world's biggest lenders. Japanese stock fell even though its factor output rose 2.4% which was above the analyst expectation and against a 3.3% drop previously backed by automakers. In China, Bank of China and China construction bank were upgraded to A from A- and Industrial and commercial bank of China's rating was maintained at A by S&P. Euro-area finance ministers approved enhancements to their bailout fund while backing off from setting a target for its firepower and seeking a greater role for the IMF in fighting the debt crisis but European markets remained mixed. A handful of data are also expected in the European and US front including crude inventories.

Source : Equity Bulls

Keywords