Pre-market: Steep fall seen in opening trades

Markets may extend deep plunge posted in the past two sessions in the opening trades following rout in equities across the globe. The Nifty futures on the Singapore Exchange declined 191 points, at 4,939.

Investors continued to flee out of equities on fear that Europe and United States may not be able to stick to their budgets and quell the spread of a double dip recession.

Asian markets plunged on Tuesday morning following sell-off in the US equity markets with banking shares taking a bigger hit. Hong Kong’s Hang Seng Index tumbled 7%, China’s Shanghai Composite lost almost 2%, Japan’s Nikkei Stock Average plummeted 4.4% and South Korea's Kospi Composite slipped 9%. Rhe Kosdaq market in South Korea was temporarily halted for 20 minutes following steep cuts in the local stock market according to news reports.

 

Standard & Poor's in a note to clients said, “The US rating change, together with the weakening sovereign creditworthiness in Europe, does point to dampened market sentiment, potentially raising funding costs in offshore markets, and reversal of capital flows.” Earlier on Friday, S&P downgraded US credit rating to AA+ from AAA which sent red ripples across the world equity markets.

Back in India, analysts expect the markets to continue to remain volatile. Going forward the Federal Open Market Committee meeting will be closely watched for any signs of quantitative easing three. In India the industrial production data for June will be released this week which will will give indication of the economic health.