Market likely to swing wildly when trading resumes on Monday

The domestic stock markets are likely to witness heavy bouts of volatility when they resume trading on Monday due to downgrading of sovereign credit rating of the U.S. by the Standard & Poor’s, experts said on Saturday. “Markets are likely to see heavy volatility with a negative bias, but there would not be a crash kind of a situation,” said Ashika Stock Brokers Research Head Paras Bothra.

Edelweiss Securities in a research note said: “Overall, risk assets, specially emerging market equities will continue to face painful bouts of volatility owing to the debt impasse in Europe and the U.S. This will, in all probability, affect market sentiments in India as well.”
Rating agency Standard & Poor’s downgraded the U.S. government’s ‘AAA’ sovereign credit rating — a development that will lead to investors losing confidence in the American economy.

“Market will be under pressure and there will be a negative bias in the short-term but it will not crash when it opens for trading on Monday,” WellIndia Group Managing Director Rajiv Agarwal also said.

Giving a different view, some experts said that the situation might prove to be a boon for Indian markets in the long-term, as India is fundamentally stronger among its peers and attracts more international inward financial flows.
Besides, the strengthening of the Indian currency against the U.S. dollar will help act as a trigger.
“In case there is any nervousness in the market, as happened in 2004 and 2008, it will be another opportunity for all classes of investors to make aggressive buying,” Geojit BNP Paribas Financial Services Managing Director C. J. George said.
“Whether this is a temporary panic sell-off or a deeper correction is anybody’s guess,” IIFL’s Head of research Amar Ambani said.

“Amid the worldwide bloodbath, there is reason to rejoice; the steep fall in crude oil prices lately is good for countries like India,” he added.
Stock markets across the world had declined sharply on Friday on fears of recession in the U.S. and debt crisis in some Eurozone nations. The Bombay Stock Exchange 30-share Sensex on Friday tanked more than 700 points before closing at 17305.87 — down 387.31 points or 2.19 per cent.
The U.S. stock markets closed on a flat note on Friday, after it witnessed wild swings, trading in a range of 400 points during the day.


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