Positive End To ‘Cliff’hanger, Q3 Results To Steer Markets Ahead

The last week has been a particularly eventful one. The defining global development was the US managing to stop short of falling off the fiscal cliff, while a noteworthy domestic happening was the Nifty breaching the psychological level of 6000. The Indian markets closed the week on a positive note, with the Sensex and Nifty gaining 1.74% and 1.82% respectively.

On the global front, a major development took place in the first day of the new year, with the US lawmakers agreeing to avoid the fiscal cliff. The deal that helped it to avoid tottering over the fiscal cliff was approved by a vote of 257 to 167. The consequences of not reaching a deal to avert this could have been catastrophic not only for the US economy but for the world economy too (including the dispirited Euro zone), as the US economy slipping into a recession would have pulled down global economic growth. It is expected that in next two months, when the US economy will be approaching its debt ceiling limit, it will open a new window of volatility again. Some key data like that related with Mortgage Application, Jobless Claims and Consumer Credit are due next week and will be watched closely.

The European indices were trading on a positive note until Jan 3, 2012. However, on Jan 4, the UK services data for Dec 2012 came in, showing an unexpected lowering for the first time in two years. This clouded the economic outlook, as Britain struggles to avoid a triple-dip recession.

As mentioned in our last weekly commentary, global events rather than domestic factors determined the course of the markets. Beginning from the next week, we will see the Q3FY13 results pouring in, and this will be the key driver for the markets. We believe that as in the past two quarters, the results will be better than the expected lines this time around too. Hence, it is expected that the markets may trade with a positive bias, with a better financial performance by India Inc.