December Series To Open Positive Ahead Of GDP Numbers

Overnight the US markets ended with small gains but remained pressurized due to the comments of the Republic lawmaker John Boehner who said that there has been little progress in the last two weeks in talks to reach a US budget deal. He, however, is optimistic about the deal. His comments capped the gains in the markets which had been rallying along with the global markets. Hopes, though, remain high about the US government reaching a budget deal to avert the so-called fiscal cliff.

Meanwhile, in India, the GDP numbers for the September quarter will be released today. The markets will track this number and show a strong impact if there are any surprises. The markets do not expect a sharp recovery and a sub-six number is expected. The finance minster earlier in the month had said that growth was about 5.5 per cent in the September quarter. Any number below that will lead to some decline in the market today.

The rupee yesterday made a smart comeback due to a stable to positive outlook on the country. Moody’s have affirmed a ‘stable’ outlook on the credit rating of the country while Goldman Sachs has put an ‘outperform’ rating for India.

In the European markets the yields of the Spanish and Italian bonds fell, which lifted the euro by 0.2 per cent against the dollar. The European markets yesterday recorded handsome gains with the CAC and FTSE gaining by over 1 per cent and the DAC closing with 0.78 per cent gains.

The Asian markets have also begun the day in the gain zone with Hang Seng and Nikkei showing significant gains of over 0.5 per cent each. The markets in Shanghai are however flat to positive in trades. Japan’s Nikkei has been the best performing market in Asia with gains of 5.3 per cent. The market has benefitted mainly because of the softening of the yen as well as on expectations that the Liberal Democratic Party will win the lower house elections on December 16 and put pressure on the Bank of Japan for aggressive monetary easing. China, on the other hand, has shown a decline of over 5 per cent, becoming the worst-performing market in the region as the smooth transition of the leadership in the country has done little to restore confidence in the markets. 

Earlier in the morning, Japan’s industrial output rose unexpectedly by 1.8 per cent whereas the experts were expecting a decline of 2.2 per cent. After the announcement of this data, experts now believe that the economy is likely to have bottomed out earlier than expected.

The crude oil prices have further declined due to supply worries. The crude future for January was also down by 0.43 per cent to USD 87.69 per barrel.

These two news items along with hopes of voting on the FDI decision may see the rupee gaining strength. Overall we expect a positive opening in the market. The GDP figures will however be very crucial as any sharp decline may lead to some volatility in the market.