Brace for a pressured open and a volatile trading session today. The rupee will continue to remain under pressure and this will create a strain on the market sentiment for atleast a couple of days more from here. The government has stepped in to curb inflationary pressures that are likely to crop up. But the practical utility of these measures have to be seen to be believed. That is yet some time away. For now, investors will be weary of betting on a volatile global situation which could spiral into a full fledged conflict if not controlled properly.
The market is facing its first test of perseverance ever since the new Bull Run began following the victory of the BJP led NDA last month. Geopolitics has been the worst nemesis of the markets for over a year now. While Ukraine continues to bubble, Iraq has thrown open a completely new challenge over the past fortnight. Both these regions have a significance of their own as far as their impact on the global markets is concerned. In this context, there is no better example to look for than our own macro factors. Fears of rising crude prices in the aftermath of the Iraq crisis have led to a scurry in dollar acquisition by oil importers. The result has been a sliding rupee over the past couple of days.
The market’s reaction to this has been on expected lines. After a two day slide, it did recover yesterday, in fact, rising by a good measure bringing benchmark indices closer to their set range over the past month. The Sensex is hovering above the 25000 mark while the Nifty is floating around 7600. The new government is just about beginning to get a grip on the economy. All factions apparently seem to be working more concertedly towards improving the fundamentals of a shaky economy that they have inherited.
The results of the efforts will be clear in the days to come. The market is discounting the perceived good impact of these measures and treading higher levels. On the domestic front the biggest challenge right now is to control inflation. The move to increase the minimum export price of essential commodities initiated yesterday is a good one to start with. The allowing of free movement of fruits and vegetables between states is another step that will help stem inflation. There are many more measures that have been announced as a part of this inflation control package yesterday. All this lends credence to the commitment of the government to act on the ground in a proactive manner rather be reactive and impulsive after the damage is done.
These measures will surely add to the positive sentiment of the markets. But the worry is, global geopolitical tensions will negate the positive sentiments and pull the markets down. The pressure of the negatives could be far more than the market’s mind is willing to absorb. Iraqi oil supply disruptions could send crude up and away. At an expected $200 or thereabouts for a barrel, you could imagine the impact of it on our macros. The government surely has its eye on the off shore developments, but those are largely beyond its control.
Considering the above situation, markets are likely to remain volatile over the near future. The next 8 to 10 days will be a very crucial period from the market’s point of view. Any major escalation (which right now seems more probable) could send the markets in a tizzy. Of course, one point to remember is that the floor for the benchmarks on the downside could be set at a reasonably higher level this time around.
US markets closed in the green yesterday following higher consumer price data. Expectations of the Federal Reserve detailing a largely positive picture of the US economy, following this upbeat data on consumer prices sent stocks higher. The Dow was up 0.16%, while the S&P 500 rose 0.22%. The Nasdaq Composite closed up 0.37%. European markets which had been struggling on the downside following the Iraqi crisis finally found some cheer yesterday. Major benchmarks in the region ended the day in the green breaking a three-day losing streak.
Asian markets are largely on the negative side today. Except for Hong Kong, Japan and Taiwan, all others are trading on the lower side. The Japanese Nikkei is up 0.45% as of now, followed by the Taiwan Weighted which is currently trading up 0.20% and the Hang Seng which is just about managing to hold itself above water. China, Indonesia, Malaysia, Singapore and Korea are all down with benchmarks losing an average quarter percent.
On the domestic front, brace for a pressured open and a volatile trading session today. The rupee will continue to remain under pressure and this will create a strain on the market sentiment for atleast a couple of days more from here. The government has stepped in to curb inflationary pressures that are likely to crop up. But the practical utility of these measures have to be seen to be believed. That is yet some time away. For now, investors will be weary of betting on a volatile global situation which could spiral into a full fledged conflict if not controlled properly.
