Stock market: Traders count on positive US cues

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By S Jha

New Delhi, June 26: On Friday, the US equity markets closed higher, with traders claiming that the fund houses after a long time actually bought into the equities. Indian equity markets swing to the cues of their US counterpart, keeping close eyes on the future markets to pick up even the slightest of the signals.

In March, 2020, the Indian equity market had sunk, and so had done all the global indexes, wiping out trillions of USD of the wealth of the people and the savings of the middle class.

Something similar has happened in the past few months in the global equity markets, including in India. The indexes have sunk in the range of 25-30 per cent, while individual stocks have plunged by over 50 per cent without any change in their fundamentals or earnings.

The traders in the US and India have been fretting in the last few weeks to catch the market bottom, the trickiest of the job, which only a few technical chartists have done in the past.

The US traders are being seen to be taking positions in anticipations of the pension fund-rebalancing, which could bring in additional USD 30 billion in the equity market, which would be good enough to give a spurt to an oversold market conditions.

However, this is a mere hypothesis, and no investment decisions should be done on the basis of what the traders are doing in the market, because there’s another sections of the traders who believe that the global inflation will not cool down until Russia calls backs its military from Ukraine.

The Russian President Vladimir Putin has no business in obliging the wishes of the equity and bond market traders.

Still, a big number of people in India are buying shares in the stock market, through mutual fund or even directly, since the returns on the small savings have plunged in the recent years, which when adjusted with inflation gives negative returns.

Such Indian investors have kept the Indian stock market afloat even while the foreign institutional investors (FIIs) liquidated almost USD 39 billion in the last nine months of their holdings in the Indian indexes.

While the FIIs are selling the Indian stock markets as if there will not be another day, their domestic counterparts are just lapping, buying shares into the ‘oversold’ conditions, principally led by the Life Insurance Corporation and the other private insurance companies.

The silver lining in the US is that the traders have become hopeful that the Federal Reserve will eventually tame the runaway inflation.

The consumer price index, measure of the inflation, in the US was 1.4 per cent in January 2021. It rose to 7.5 per cent in January 2022.

Ace American trader Mark Minervini on June 23 claimed to have picked up the signals of inflation cooling off, taking note of the prices of fertilizers and used cars.