There is a completely synchronized thought about the economy having seen its worst and that there is just one way from here on which is on the up side. Well that ‘up side’ may be some time away as things begin to unfold. Looks like, the market is already discounting that up side as of now and will continue to do so at least for next couple of months. There is no doubt on where the markets are headed today. The SGX Nifty is currently trading up 37 points which is a clear indication about the general mood on Indian equities.
Welcome to a fresh new trading week. We are looking out for Bears. But the way things are, it would take an enormous effort to locate one. The Bulls have been on a rampage and have trampled the Bears beyond recognition. The optimism that took roots as the election process was underway has found new wings with the mind blowing win of the BJP led NDA. There is nothing that can stop the Bulls at least for now.
The ideas and actions of the newly sworn in Government are what everybody will focus on now. There is a great deal of expectation from Mr Modi’s brigade with the promising formula of ‘minimum government, maximum governance’ at work. The market’s reaction to the first few days since the government took its seat has been quite positive. What the market needs to remember is that, the time to speculate on the type of governance is over. Action oriented decisions is what should be driving us here on.
The time to face actual challenges is unfolding and the response of the government to these challenges will determine its success or failure. There is lot on its plate including, inflation, a sluggish industrial production, revival of the investment cycle and of course coming out with a balanced budget for the next year which will need complete attention over the next couple of months. The confidence about the government being able to address all these issues is quite high and hence the Bulls are currently in control of the markets.
On the flip side, even a slight bungling on any of the issues could lead to a reversal of the optimism that has gained nothing short of euphoric proportions as of now. But that should not be a worry. Even a reversal, if triggered will not take the markets tumbling down. There is a completely synchronized thought about the economy having seen its worst and that there is just one way from here on which is on the up side.
Well that ‘up side’ may be some time away as things begin to unfold. Looks like, the market is already discounting that up side as of now and will continue to do so at least for next couple of months. Meanwhile, the focus will now shift on the traditionally core issue, that of fundamentals. The week brings us a lot of macro data to focus on.
Trade data will be out, as early as tomorrow. Stronger exports against imports, leading to a better Balance of Payments position should further help the markets up. The more crucial macro pieces will emerge towards the end of the week. Inflation and IIP numbers are to be announced on Thursday and that should be a trend setter for the immediate future. While not a great deal of improvement will expected, we are currently trading in a zone where every piece of data can strengthen or break the optimism. Hope will now rest on these to come out well. The RBIs actions are well placed and these will have to be followed up with some concrete policy decisions to support.
Meanwhile, globally to markets have been riding on some good fundamental data. US markets ended last week on a good note with some encouraging employment data having lifted the sentiment. The Dow was up half a percent while the S&P 500 rose 0.46%. The Nasdaq ended the day with some good gains too. Europe too has been doing well and benchmarks there too ended the week positively.
On the Asian front, the week has opened on a positive note. China has been the principal factor in triggering an optimistic commencement to the week for the Asian region. Encouraging export data for China has pushed up markets in early morning trades. All benchmarks are trading in the green with Hong Kong leading the pack. The Hang Seng is currently trading up 0.68% followed by the Japanese Nikkei which is up more than half a percent as of now. The Shanghai Composite is up only marginally though as of now. Indonesia, Malaysia and Korea are trading on borderlines with benchmarks up an average 0.08% while closer to home; the Straits Times in Singapore is up a quarter percent.
There is no doubt on where the markets are headed today. The SGX Nifty is currently trading up 37 points which is a clear indication about the general mood on Indian equities. Many sensitive levels on the upper side have been broken with utmost ease over the past couple of months. The Benchmarks are cruising to newer heights every passing day and week. The floor has almost been set for the next big move and a whole lot of retail investors will now anxiously jump into the market. Institutional investors from abroad may not want to cash out so soon, but a bit of a profit booking will bring some equilibrium to an otherwise bouncy market.
