Global Factors May Keep Markets Pressured

The week ahead may see increased volatility and may also see downward pressure adding on to the markets on account of the release of key domestic data and due to various global macro economic factors. While the markets have yet been under pressure on account of the fiscal cliff and increasing worries over Europe, new issues such as weak Japanese data have now propped up. The markets would be keeping a keen eye on developments in the U.S. and in the Euro zone.

Moreover, the Indian industrial production figures are scheduled to be released later today and the Wholesale Price Index (WPI) inflation data on Wednesday. The markets would also watch these factors since they are likely to give a clear picture of the current situation of the Indian economy. Also, since the markets would be open for a little more than an hour on Tuesday for Muhurat trading and closed on Wednesday on account of Diwali, one may see added volatility during this week.

While the global markets continue to remain jittery due to concerns over the fiscal cliff, Europe has been sliding downwards due to Greece and Spain. The European markets were initially looking at Monday’s meeting of the European ministers to come to an agreement on the pending aid payment to Greece as part of the extension of the current bailout programme. However, the markets are feeling quite pessimistic about a decision being taken this week. While the Greek bailout remains in question, markets have also been worrying about Spain not officially asking for a bailout.

Added to these worries were data from France and comments over Germany which further hurt investor sentiment. The Bank of France said that the economic activity in the country is slowing down and the fourth quarter GDP is expected to decline by 0.1 per cent, putting France into recession. All these factors are likely to result in a downward opening in the Euro zone and also add to downward pressure on the Indian markets.

The Asian markets have opened on a weak note today. The Chinese markets have been trading positive due to a rise in industrial output and retail sales, which grew by 9.6 per cent and 14.5 per cent respectively, indicating a recovery. However, the Japanese markets are lower by 0.52 per cent as Japan’s economy shrank by 0.9 per cent QoQ or 3.5 per cent YoY due to a significant weakness in exports.

All these global factors are likely to make the Indian opening weak. The markets have been functional in a highly gloomy backdrop since last week and this trend has become worse. This is likely to weigh in heavily on the markets. Although last week didn’t see any domestic data defining the direction while shifting higher concentration on to corporate results, this week would be centric to industrial output and inflation data. The previous readings for IIP and WPI were 2.7 per cent and 7.81 per cent respectively. Investors would be keeping a close watch on these figures to see if there’s any improvement in how the economy is faring. Overall, the street is expecting a mild increase in the IIP and WPI.

On the results front, among the companies to announce their Q2FY13 results today are Bhushan Steel, DLF, GMR Infra, Jaiprakash Associates, Nestle India and Spicejet. Though they would make the individual stocks volatile, the market direction is likely to be dominated by the global and domestic macro conditions.