End of Year, All Depends on the US

It is the last day of the year and markets all over the world are sure to be in a very nervous state today. Talks among US law makers on resolving the ‘Fiscal Cliff’ conundrum haven’t gone anywhere. That, even according to the US president is slated to be a big negative for financial markets. Barrack Obama though, sounded slightly bullish on arriving at a solution to this problem.

The whole of past week has been quite volatile for most markets globally. India hasn’t been an exception to this phenomenon. The US, Europe and even Asia ended the week in the red. Overall though, the year seems to have ended pretty well for equities, despite all the volatility.

Taking cues from the way US markets have closed on Friday, and, the developments out there, it seems like today would probably be marred by high volatility. As we have maintained, there are no immediate factors on the domestic front which could lead the markets right now. The only immediate factor on the cards is the results season which begins somewhere next week. Until then it is the international scenario which will drive the markets.

The Japanese, Korean and Taiwanese markets aren’t open today. Economic data from Chinese shores suggests, there are reasons for the Shanghai Composite to trade up. In fact, it is, along with other Asian markets that are open. But there isn’t much to read in this for the Indian markets. Europe too is likely to take direction from where the US ended on Friday. This means, not a particularly good day in store for the CAC, DAX or the FTSE.

Analysts often go overboard in depending too much on these cues and forecasting the direction of the market for the day. The SGX Nifty is trading down 12 points at this point of time. This could be a vital sign of where the Indian markets are headed today. But as we said, there are barely any factors on the domestic front that could lead the markets.

You could see a flat to negative open and a tightly range bound trading for the day. It would be good to play cautiously for today and not take unreasonably higher risk. Wait until dark for the US to come back to business and sort out its economic tangles. A lot is expected to happen tonight and tomorrow could be a very important day for the markets. Though most of them would be shut on account of New Years Eve, Indian markets will remain open. So, while you enjoy and party tonight, we would keep our eyes on what US law makers decide so as to guide you well right from the beginning of the new year tomorrow. Here’s wishing all of you a Very Happy and Prosperous New Year 2013!