The markets have rallied quite smartly until now and are expected to continue with their positive bias as we head into a week which will be a rather action packed one. While budget expectations will continue to push it up, we also have the IIP data to be announced this weekend along with the first quarter results season getting underway. All of the above are being discounted by the markets right now. But one must remember that each of these factors has a very strong caveat behind it. None can be expected to spring a positive surprise. Hence, it looks best to hold fairly mild expectations on each one of them.
The markets have been witnessing a fairly volatile pattern of trading though the overall bias remains on the upside Worries, including the Iraqi crisis have not deterred benchmark indices from hitting all time highs, of course coming down intermittently amid profit booking or even sometimes reacting to the negative noise around them. The most important trigger for the markets over the past fortnight or so has been the forthcoming budget. To be presented on Thursday, this will be a keenly watched affair.
High expectations have been building around the budget, but the Finance Minister does not really have the leverage of presenting a very rosy budget at this juncture. The NDA has inherited an economy hit by its predecessor’s profligacy. From here on, there is an acute need to strengthen revenues, before one could even think of doling out concessions. Cutting of subsidies has been one of the most talked measures as a need of the hour.
Hence the budget to be presented by Arun Jaitley’s which will be the first test the BJP led NDA government faces will surely be a very easy one to digest. Some harsh decisions, necessary to put the economy back on track have already come in the form of the petrol and diesel price hikes put into effect over the past fortnight coupled with a hike in the railway fares. Inflationary pressures are already seen rising once again and that is a worry for the government. With the monsoon behind its schedule, the situation could only get worse going forward. All this surely lends credence to the theory of a ‘not so populist budget’ being on the cards.
One very interesting observation will hog attention as a new trading week gets underway. Christine Lagarde, Managing Director of the International Monetary Fund has signaled a cut in the institution’s global growth forecast. This is primarily backed by a weaker investment climate and the inherent risks the US economy faces despite the fact that its recovery is gathering further pace. A heartening observation is about Emerging Market economies avoiding a hard landing. That speaks a lot about the conviction that global decision makers have in the Emerging Market pack.
Amidst all this, the markets have rallied quite smartly over the past week and are expected to continue with their positive bias as we head into a week which will be a rather action packed one. While budget expectations will continue to push it up, we also have the IIP data to be announced this weekend along with the first quarter results season getting underway. All of the above are being discounted by the markets right now. But one must remember that each of these factors has a very strong caveat behind it. None can be expected to spring a positive surprise. Hence, it looks best to hold fairly mild expectations on each one of them.
Asian markets have opened mixed this morning. Japan, Malaysia, Indonesia and Singapore are trading up while all others are in the red. Except for the Jakarta Composite, all other benchmarks are trading on the edge and could go either way as the day progresses. Korea, Taiwan, Hong Kong and China, which are on the losing end, too are trading on similar lines.
That makes for a fairly undecided open to the Indian markets today. However, as mentioned earlier, the overall bias continues to remain positive and we could well go into the week with a calm start followed by some jitters as we progress toward the budget. Though there is a lot of optimism around the Indian economy and hence its impact on the market, one should take a step ladder approach in order to get whipsawed in any knee jerk reaction that could come as a result of some harsh measures of the government either in the budget or even otherwise.