With mixed global cues and some curiosity over what the RBI has in store, Indian markets are likely to see a very nervous open this morning. One has to keep in mind that the fundamentals of the economy are on the mend. Hence, the overall direction that the markets will take over the longer term will surely be on the up side. The RBI’s action on the interest rate front is a foregone conclusion. Any surprise that springs from that quarter should be measured well before reacting to it. For now, it looks like a nervous and listless trading day is in store.
The trading week has begun on quite a positive note. Benchmark indices, which had been struggling in highly volatile sessions finally found their way on the up side, with the Sensex gaining as much as 242 points, while the Nifty was up 81 points at close. The general euphoria that had enveloped the markets over the past couple of months finally seems to be ebbing out in favour of fundamentals and geopolitical factors on the global front.
The most important among these is the geopolitical situation. Iraq, Ukraine and Israel continue to boil, and the rest of the world is debating on what is right or wrong. The situation has gone from bad to worse, where experts fear a full scale escalation. That could be the tipping point for most global markets, including India. Ignoring such a global situation could turn out to be perilous for investors. The jitters that the markets have been facing are signs of its nervousness for all these reasons combined.
Economic parameters have been steadily improving or at least so it seems, thanks to the base effect in most of the cases. The improvement in economic variables such as the IIP is purely on the lower base of the previous year. Foreign trade is certainly on a strong footing but that alone will not guarantee improvement in the overall fundamental strength of the economy. On the more fundamental side or rather on the domestic front, corporate results have been more or less as anticipated with ups and downs in equal measure. There haven’t been any big surprises so far.
But all said and done, inflation still remains the focal point of discussion when it comes to mapping the future of the economy. The rainfall deficit is more or less getting covered, but does that concretely assure us of adequate food supplies and hence moderate inflationary pressures? Looking at the situation on the ground, it definitely does not look like we are in any kind of a comfort zone as far as inflation is concerned.
That brings us to the point of whether the RBI will bring down interest rates today? The central banker’s action will be the most watched factor for today. While hopes and expectations are in place, there is a clear consensus about the Governor maintaining a status quo considering the overall situation, especially with respect to inflation.
In some encouraging overnight action on the global shores, stocks in the US rose in last mile trading buoyed by results from Berkshire Hathaway and a general bounce across the board. The Dow ended up 75 points while the S&P 500 rose 13 points. The Nasdaq added 31 points to its previous close to end the day in the green.
Asian markets are trading mixed this morning. Japan is marginally down but the Shanghai Composite in China is up 0.15% as of now. Taiwan, Korea, Malaysia and Hong Kong are all down with benchmarks facing a good amount of pressure, while Indonesia and Singapore are holding up with some good gains in their benchmarks.
With mixed global cues and some curiosity over what the RBI has in store, Indian markets are likely to see a very nervous open this morning. One has to keep in mind that the fundamentals of the economy are on the mend. Hence, the overall direction that the markets will take over the longer term will surely be on the up side. The RBI’s action on the interest rate front is a foregone conclusion. Any surprise that springs from that quarter should be measured well before reacting to it. For now, it looks like a nervous and listless trading day is in store.
