Chart of the day: How Indian market reacts to ECB bond-buying

Investors will watch equity markets keenly on Friday, after the European Central Bank (ECB) agreed on a new bond-buying programme on Thursday to lower struggling eurozone countries' borrowing costs. It is the third instance of bond buying by ECB in a matter of eight months.

Round one was carried out on 21 December 2011, when banks took 489 billion euros from the ECB. The loans are due to be repaid within three years at a rate of 1%.The biggest recipients of LTRO in December were banks in the weaker euro zone countries such as Italy, Spain, France, Greece and Ireland. The ECB’s second round of 529.5 billion euros in March 2012 were three-year loans to around 800 lenders with the intent to arrest a financial crisis.

Below chart shows how the Indian market had reacted to previous two bond issuances:

Indian equity markets were overjoyed in December when ECB announced bond-buying. However, the second time around, things kind of mellowed down. If the trend continues, we will probably see a spike up in tomorrow's trade and then things will be back to square one with all eyes on domestic macros.