After two days of stellar rally, domestic markets are expected to open flat on Wednesday amid weak Asian markets. Analysts expect the market to moderate due to profit booking as valuations look stretched. Besides, the coal supply crisis and high crude oil prices will also impact the sentiment.

According to reports, 64 non-pithead power plants have left with less than four days of dry fuel stocks. A sharp increase in energy demand as the economy opened up post-pandemic restrictions is causing a "beyond normal" shortage of coal, which could last as long as six months. Union Power Minister R K Singh.

However, Moody's upgrading of India's rating to stable from negative will help bullish sentiment prevail, they added.

SGX Nifty at 17,807 signals a flattish-to-negative opening for Nifty futures, which on Tuesday closed at 17,827.95. Though the battered US stocks recovered sharply on Tuesday, most Asian stocks were down between 0.2 per cent and 0.8 per cent on Wednesday.

Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities, said, Moody’s outlook upgrade to stable reinforces the fact that the risks for the financial sector are lower now along with visibility of sustained growth and gradual fiscal consolidation. The fiscal situation is also better than what it seemed at the start of the pandemic. "While there are some structural issues on growth, some of the reforms and measures taken since the pandemic and measures before it, will be positive for growth in the medium to long term. To that end, stabilisation in GST regime, streamlining of IBC, implementation of labour codes, smooth execution of PLI scheme, and shift of focus towards infrastructure building will be likely positives over the next few years," he added.

However, the market may move in a narrow range ahead crucial outcome of RBI policy meet and TCS second-quarter results on Friday said analysts. The upcoming policy will be watched for the RBI's stance on liquidity management.

"While the RBI may not shock the system with a reverse repo hike, the policy will be used as a lever to prepare markets for a gradualist approach toward normalization through both communication and action. Markets will still be assuaged that no premature tightening of financial conditions will happen and the uptick in yields will be managed," said Emkay global.

Global worries

Signs that the real estate crisis in China is not just limited to Evergrande were evident as Property developer Fantasia defaulted on its debt payment of $206 million that was due on Monday, said IFA Global Research.

The OPEC+ cartel said it would stick to its production increase schedule of 400,000 bpd every month until April 2022. Market was expecting the cartel to accelerate the increase in production given the global energy crisis. Brent prices soared above $80 per barrel, and WTI traded at the highest level since October 2018.

The US government is fighting hard to increase thedebt ceiling to avoid possible shutdown.

US Treasury Secretary Janet Yellen said it would be a "catastrophe" if Congress did not raise the debt ceiling. She said October 18 remains the date that the treasury is likely to run out of resources to stave off an unprecedented default on the nation’s debt without congressional action to raise the debt limit.

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