Markets Likely To Open Positive

The dilemma of whether the US will tip over the Fiscal Cliff continues to trouble markets.  However, the Indian markets, which gained 4.5% last week, are likely to start the day on a positive note despite a lack of strong unidirectional sentiment globally. The Parliament goes to vote over the issue of FDI in retail this week, the outcome of which will be awaited and watched very keenly by the markets. The result will provide clarity on the Goverment’s intent and ability to carry forward reforms.

The Indian GDP for Q2FY13 came in at 5.3% as compared to 6.9% in the corresponding period of the previous year. This was pretty much in line with what was expected. This, coupled with the government increasing FII investment limits in government securities and corporate bonds by USD 5 billion each, taking the total investment limit in domestic debt to USD 75 billion will provide support for an upward move of the markets.

Globally, markets traded flat as anxiety over the triggering of the fiscal cliff increased. As the December 31, 2012 deadline approaches closer, markets have been getting increasingly sensitive to comments from leaders, political action and speculation. However, uncertainty over the issue has resulted in a mixed response on the bourses. The US markets closed flat on Friday moving in a range of -0.07% and 0.03% only. European markets too concentrated on these cues and ended the day with losses in the range of 0.06% and 0.33%.

The final reading for November of the HSBC and London based Markit Economics of the manufacturing Purchasing Managers’ Index (PMI) for China came in at 50.5 today, higher than the preliminary reading of 50.4 and that of October’s reading of 49.5. These figures have gone above the 50 mark that draws the line between expansion and contraction, for the first time in 13 months. Similar data released by the government came in at 50.6 for November as against 50.2 in October. This has resulted in gains in the Asian markets. However, the Shanghai Composite is trading lower by 0.31%.

The rupee has been on a rise along with equity markets. This has been a result of the GDP growth being in line with expectations and increased hopes for monetary easing. However, the focus turning to the retail FDI voting in Parliament may add a tad of uncertainty for the INRs movement today.

Although voting for FDI in retail remains the focal point for the markets this week, the enhancement of investment limits for FII in debt and the GDP for 2QFY13 coming in much in line with what was expected will lend a positive bias for the markets to trade today.