A Flat Open and a Negative Bias For Today

Yesterday’s market action went exactly as we had said it would. The markets had opened up with a gap up taking cues from overnight developments in the US markets and tracking its Asian peers. However, after noon most of the time it traded flat and closed in the red, but only marginally. Today is a big day for the markets for many reasons. Talk about global cues, there is renewed optimism all over the place as can be seen from the overnight developments in the US. The US markets after a blip, have started moving up again thanks to the optimism that has set in on expectations of good results from corporate America for the December quarter. In fact, the S&P 500 hit a fresh 5-year high yesterday.

On the European front, the ECB has left key rates unchanged. This move, at least for now, puts to rest any seismic behavior that could be expected on the European economic front. Remember, European worries will not go away so soon. It is better to take them as they come and the markets too have factored in this feature by now. For now these markets largely follow the US for directions.

Economic data emanating from throughout the world has been quite positive in this New Year. Yesterday China too has reported a rise in its exports. This is a very critical signal from many angles. It was this piece of data that actually drove the US markets up yesterday. Morning trades on the Asian front however, seem to be mixed. The bias remains on the positive side. China, Hong Kong, Indonesia, Japan and Taiwan are trading positive while Malaysia, Singapore and Korea are in the red.

As we said earlier it could well turn out to be a big day for the markets today. Among the most important developments that will drive trading action are results from IT bellwether, Infosys. While many believe that the company is likely to cut on its growth forecast, do keep in mind that this company has always had the habit of under promising and over delivering. Also, the IIP data slated to be released today will be shape the course from mid morning onwards.

The SGX Nifty is trading marginally up by 7 points. Markets here are likely to open on a flat note and trade in a very narrow band with a negative bias at least until mid morning. IIP numbers are reportedly expected to be flat to negative on a high base effect. Infy results will see the markets take a turn – good or bad, we would say stay rather cautious and do not take fresh positions for today based on expectations of these data flows.