Considering the developments on the domestic front (a lower IIP but a favourable opinion on a strong and decisive government) coupled with the global volatility could see the markets getting torn between the Bulls and the Bears. However, the strength of elections as an influencing factor is far stronger than anything else as of now. Corporate results should now on set the tone for a more stock specific action but with a limited impact. The bias is likely to remain positive going forward. Look out for a positive open and watch out for developments as they unfold.
Welcome to a very short holiday trimmed week. After the extended weekend will come an early ending to the week thanks to another holiday towards the end of it. But, with just three days of trading between today and Thursday, this could turn out to be the most eventful week for the markets so far this year.
We begin with sentiments badly torn between two extreme factors. On one hand are the dismal IIP numbers for the month of February those were announced on Friday post market hours. Just to put the numbers in perspective, Industrial Production for the month of February contracted -1.9% in the month of February, which spells a nine month low for this indicator. What is more intriguing about these numbers is the contraction in manufacturing, which accounts for almost 80% of the total IIP. This component was down 3.7%. Mining and Electricity have been the saving grace having increased by 1.4% and 11.5% respectively.
This contraction in the IIP COULD play a spoiler in the party that investors and traders and currently reveling in. The market decline over the fag end of the preceding week is being looked at as a breather that came more due to the global factors than domestic happenings. The reason for the ‘could’ is quite simple to explain. A bulk of the market sentiment is currently riding on the political fervor. The process to elect the next Government is already underway. Expectations of a strong and stable government coming to power are hugely driving the markets right now.
Any development on the political stage is being considered to be far more important than economic or corporate happenings that can have an impact on the markets. It is here that the second and contradictory factor comes into play. Talks of a Modi led NDA assuming power at the centre is getting stronger and stronger. The latest in line is the NDTV opinion poll which puts the expected number of seats for the NDA at 275. That is a decisively higher number. The markets WOULD certainly like to celebrate such a decisive vote which can result in the expectations of a strong government turning into a reality.
It is this difference between the ‘COULD’ of reacting to the poor IIP numbers and the ‘WOULD’ of reacting to the noise of the NDA securing a decisive vote which will determine the course of this holiday shortened week. Meanwhile, another important factor comes into play from today. Infosys kicks in the corporate results season by announcing its March quarter numbers today.
Though the markets will be hugely fixated to what comes out of the March quarter numbers, there is not much to expect here. In fact expectations from the March quarter numbers look to have been already priced in. However, this factor will now turn the markets into a stock specific play for some time. The real challenge this time is to see how the market copes between the larger electoral drama that will cast an overall shadow on the markets and this more stock specific factor that will pull or push individual stocks at least for the next 15 to 20 days.
Globally, markets are recovering from the onslaught of bears that hit them hard towards the end of last week. US markets fared well last evening with stocks recovering sharply from their lows. The Nasdaq too was seen recovering from the swoon it faced over the past couple of trading sessions. Strong numbers on the retail sales front for the month of March along with some good set of results from Citigroup helped the US markets come out of the gloom. European markets too turned positive yesterday after the sell off as investors bargain hunted for cheaper stocks. Asian markets are mixed this morning. Japan, Singapore, Indonesia, Korea and Taiwan are trading in the green while Hong Kong, China and Malaysia aren’t doing that well.
Considering the developments on the domestic front (a lower IIP but a favourable opinion on a strong and decisive government) coupled with the global volatility could see the markets getting torn between the Bulls and the Bears. However, the strength of elections as an influencing factor is far stronger than anything else as of now. Corporate results should now on set the tone for a more stock specific action but with a limited impact. The bias is likely to remain positive going forward. Look out for a positive open and watch out for developments as they unfold. Do not get over excited and jump into the markets at this stage with all your resources, it could well turn out to be disastrous, knowing political outcomes can be contradictory.
