Rating Downgrade but .. reaction to it is "Mea"

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This is the excerpts from my morning market view that is posted early in the morning in my blog

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Pre-market view: 02 June

Positives:

  1. All around positive mood still intact

  2. Non-stop FII buying in cash market

  3. Economy is opening up

Negatives:

  1. Moody’s down grade of India’s Sovereign rating to just one grade above “Junk”

  2. US protests are escalating

  3. Both US & China are not backing down on Hong Kong

Global Markets: Positive

European markets ended in red and US markets managed to end in green. The positive mood in the other assets/ markets are still intact. Both Copper and MSCI Emerging market index continue to raise. Volatility index is still trending lower. US Dollar was lower and Gold was slightly higher on account of US Dollar weakness.

ASIAN Markets this morning: - Mixed reaction

Japanese, Korean and Indonesian markets are up and continue their relief rally while Australian and Chinese markets were slightly down this morning. The European and US futures are down in the Asia trading session. SGX Nifty trades flat at around 9830 levels.

Calendar events

India’s manufacturing Purchasing Manager’s Index (PMI) that came out yesterday was below expectations. Service’s PMI will be released today by 10.30 AM. It is expected to be in the range of 23 Vs previous reading of 5.4. Asian PMI was mostly down barring Chinese and Malaysia where economy had opened up little earlier. However there is a hope in the market that the PMIs are bottoming out.

India : -Rating shock…. but no shock

Global rating agency Moody’s downgraded India’s Sovereign rating by one notch to Baa3 which is just one notch above non-investment grade. This news should have sent a shock waves in the SGX Nifty and USDINR markets when it came out yesterday evening. However, a small spike on USDINR was quickly retraced and there was no reaction on SGX Nifty. Therefore, I feel that the rating action was expected and already discounted by markets.

However, today markets will mostly go the way FIIs go. Therefore, traders need to watch out for any signs of FIIs selling at market top.

Result announcement:

Britannia, Indigo and Motherson Sumi will release their results today and Cholamandalam Finance will release their result tomorrow.

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