Headed For A Good Opening

Last night even as you were rejoicing the onset of a new year, President Barrack Obama shed some light on how close the deal on measures to avert the ‘Fiscal Cliff’ was. Even as we await the markets to open on New Years day a deal is reported to have been signed between US law makers which puts off the ‘Fiscal Cliff’ fears for another two months.

Domestic economic data that came up yesterday isn’t looking very encouraging. In fact, it looks bad. The current account deficit has shot up to 5.4 per cent of GDP in the September quarter against 3.9 per cent in the June quarter. The fiscal deficit for the April –November period has already hit a whopping Rs 4.13 lakh crore which pegs it 80.4 per cent of the Budget Estimates.

So what does all this mean for the Indian markets (which would be the only ones to open today in Asia)? Other Asian markets are closed for New Years Eve today. Reactions to the Fiscal Cliff’ deal in the US and the gloomy economic data is what will drive markets today. This could help the markets open in the green and lend a whole lot of positivity to them going into the New Year. Will the domestic economic data points spoil the party?

Remember India’s fundamentals remain intact. It is a strong consumer oriented economy unlike others big nations which are more export dependent. A gap between the rising imports and contracting exports could be a piece of evidence which points towards this fact. Of course there remains a caveat here. This gap is probably the reason of higher gold imports rather than merchandise imports. But not all of it can be attributed to gold imports alone. So, that keeps the Indian consumption story going.

It is good to focus on the positives, more so, on the first day of the year. The aversion or rather pushing forward of the ‘Fiscal Cliff’ spells good for the markets today. Taking cues from this development, markets are likely to see a positive open today. However, remember fiscal worries on the domestic front will weigh in on the performance of the markets to a large extent. So, though we expect the markets to open in the green taking signs from the way the SGX Nifty is trading (up 28 points) the up side or rather the euphoria of the ‘Fiscal Cliff’ having been averted at least for the time being will be capped by worries on the domestic economic front.