Markets may continue to remain under pressure this winter

Across all global economies, all the equity markets showed considerable bearish sentiments during last couple of weeks. The reasons were both global and domestic factors. The ongoing winter session of Indian Parliament has been experiencing logjam as the Opposition parties are creating obstructions on the way of paving the much- awaited goods and service tax (GST) bill. The government is making every effort to pass this key bill and accepted two out of four conditions of the biggest opposition party, Congress. However, despite of these proactive steps, the current logjam in Parliament is making it difficult for GST to pass during the ongoing session. This very fact has started showing its negative impacts on the markets and closing lower & lower for consecutive six trading sessions.

On European front, the European Central Bank (ECB) has cut its key interest rate and extended its stimulus program to further encourage the Eurozone economy. ECB has cut the interest rate on deposits from commercial banks to -0.3 per cent from earlier -0.2 per cent. Along with this the ECB extended the bond buying program and the stimulus size will increase from its earlier 1.1 trillion euros. However, the market participants had predicted higher rate cut upto -0.4 per cent. Hence the negative sentiments across European markets exaggerated due to below expectation rate cut.

The US Federal Open Market Committee (FOMC) meeting is scheduled on December 15-16. The overhand continues as the US Fed Reserve had given clear indications about the rate hike during its December meet. However, major global economies are still not in their best shapes and struggling to bounce back from the prevailing economic slowdown. The Fed was giving slump in major global economies for last couple of meetings for not hiking the rates. Though the macro economic factors such as unemployment data are favourable to rate hike.

Further, the Fed will hike its policy rates after almost a decade and hence there are considerable speculations as the rate hike will signify the good status of US economy. However, the US rate hike is assumed to be negative for the emerging economies like India as the foreign institutional investors will withdraw their investments from these economies. However, this rate hike will have limited impact now as the event had been talked a lot and discounted already in the market. Further, the FIIs were continuously selling the Indian equities for last few months. However, still short term impact is seen in the market at present.

Crude oil prices too tumbled to lowest in nearly seven years after the Organisation of the Petroleum Exporting Countries’ (OPEC) failed to address a growing supply glut. A stronger dollar made it more expensive to hold crude positions. The US Benchmark crude was dropped to USD 37.65 per a barrel - the first close below USD 38 since early 2009. The lower crude oil prices are making the oil exporting economies weaker and also signifying the weakening of overall global economies. Hence we expect the markets continue to remain in pressure with negative biased over Fed meeting and current Parliament session during last half of the current month.