Overall global cues and domestic developments are suggesting a subdued open for the Indian markets today. On the domestic front, corporate results remain the most concurrent of factors driving the markets today. Globally too, it is the same set of data that is helping markets seek direction. Of course, the election noise is still reverberating and will continue to do so, but the shrill is down many notches forcing the markets to turn less euphoric and more cautious. Do not wait for May 16th, remember, the markets always discount the future well in advance. Sitting on profits only to see them evaporate in thin air is foolish. Take some home and wait for a more opportune time to plough them back.
The markets continue to trend on the higher side on multiple cues. The principal factor that is currently driving the markets remains the ongoing General Elections which have now entered the final phase. With just a couple of days of voting (7th May and 12th May) and less than a fortnight before we get to the results, the two month anxiety and drama over what the political equation will look like will soon come to end.
Expectations of a strong government with a decisive leadership coming to power have already led the markets into a new orbit from where they were trading a couple of months ago. The force of this one factor has been so immense over the past two to three months that almost all else has been conveniently sidelined until now.
But if you look at the way the markets have been behaving over the past one week of trading or so, one can clearly see the euphoria slowly and gradually turning into caution. The over confident rhetoric about an NDA government coming to power has mellowed down substantially, not because ground realities have changed, but because real probabilities are now being weighed.
One point that the markets and all investors need to keep in mind before reacting to the election results (surprises included) is that, the need of the hour is a Government which can firmly pull the nation out of the economic slumber and push it with full force into the future. Growth at any cost has to be the mantra of the new government. There is no option available to anybody (and I repeat, anybody) to sit back and carry out the affairs of the nation as they have been done so far, particularly in the past five years. What this means is, though one could see a knee jerk reaction in the markets over any surprises, those could well be temporary. No matter who comes to power, pushing for growth will be the central point.
Look at the Deepak Parekh Committee’s recommendations. These present a roadmap to finance the country’s ambitious infrastructure plans to the tune of a trillion dollars over the Twelfth Five Year Plan. If the government can implement such a plan, a trillion dollars, to begin with should be a fair amount of money to ensure reasonable growth over the next five years. That takes care of the principal factor that should keep the markets up. But all that, of course long term perspective.
As for today, markets will continue to ride on three main planks; global cues, election noise and the ongoing corporate results. Until now, the last factor (corporate results) has not really created any big flutter in the markets. Just wait for them (the markets) to get over with the election mania and all the good and bad about corporate India’s performance will come out with a vengeance to turn the markets into one big bullpen with traders and investors ready to strike at the first opportunity.
Global cues are being driven by geopolitics more than economics. Ukraine is raising its head on and off. Russia, sanctions and a possible military standoff is keeping global markets on their toes. Volatility has gone up following this and will continue to remain so. In the US, markets tracked some important corporate results for the March quarter to end the day on the lower side. On one hand were some disappointing numbers while on the other were some weak macro numbers which revealed that its trade deficit narrowed by a lesser margin than was expected by the markets. The Dow fell more than 0.75% while the S&P 500 was down 0.88% on close.
On the Asian side, concerns of a Chinese slowdown are looming large. HSBC released a weak picture of Chinese manufacturing on Monday making markets slightly nervous. With Japan and Hong Kong shut on account of a holiday yesterday, the real impact on overall Asian sentiment is being felt today. Except for Indonesia, all other markets are trading negative. The Japanese Nikkei is down by a huge 315 points (2.18%), while the Shanghai Composite in China is down 0.32%. After the Hang Seng in Hong Kong, which is down 0.88% as of now, Singapore, Korea, Taiwan and Malaysia are down an average 0.60% from their yesterday’s levels.
Overall global cues and domestic developments are suggesting a subdued open for the Indian markets today. On the domestic front, corporate results remain the most concurrent of factors driving the markets today. Globally too, it is the same set of data that is helping markets seek direction. Of course, the election noise is still reverberating and will continue to do so, but the shrill is down many notches forcing the markets to turn less euphoric and more cautious. Do not wait for May 16th, remember, the markets always discount the future well in advance. Sitting on profits only to see them evaporate in thin air is foolish. Take some home and wait for a more opportune time to plough them back.
