A Red Opening and a Stressful Day Ahead

Corporate results are the buzzword for the markets presently. Almost all major market activity is centered on how companies have fared in the December quarter. Yesterday, markets across the board traded with a negative bias with a fair amount of profit booking having happened. Results on the domestic front weren’t very encouraging especially with Bajaj Auto having seen a lot of pressure on its financials during the quarter.

The finance minister continues to hold his pre-budget meetings. Industry leaders yesterday, put across their points to ensure a friendlier budget. How much will the ministry deliver on their expectations? You could probably see a few give and takes, here and there. It will be rather difficult for the finance minister to ensure any populist or easy measures in his budget this year given the pressures of managing a huge fiscal and current account deficit. But there is yet some time before the markets start thinking about this. Right now, corporate performance, as we said remains the key word.

US markets too have been following corporate Americas’ performance for the December quarter and making moves accordingly. Yesterday, there too, it was a rater tepid trading session with the broader indices ending almost flat. The Dow has snapped its five-day winning streak to end in the red, though only marginally. A report from the Federal Reserve suggests that the US economy has picked up in the December quarter. This will probably play out on the markets tonight holding up the positive sentiment that has been in the air since the beginning of the year.

Meanwhile, Asian markets have opened mixed this morning, but are trading in the green. In a very volatile session so far, the Japanese Nikkei is trading up almost 70 points. As usual, except for China (the Shanghai Composite trading down 11 points) all others have held up to their opening gains and are seen trading positive. Hong Kong, Malaysia, Singapore, Korea and Taiwan have been just about holding out to their gains but could go down as the day progresses as trades seem to be slightly pressured.

What happens to us? Well you could see markets taking off from where they ended yesterday. There is nothing in the global cues that could lend a positive bias to the markets today and it could result in a muted open this morning. Some big results are coming our way today. HCL Technologies and Hero MotoCorp will be keenly watched. The IT space has done well so far with positive surprises, both from Infosys and TCS. If HCL Technologies disappoints, market could react negatively. Remember, when the going is good nothing harms, but when the tide turns it takes every bit of it downhill.  Hero Motocorp will probably not do much damage to the overall sentiment as a weak set of numbers from the Auto sector have already been factored in by the markets. Yes, a positive surprise (very rare to happen) could help lift sentiment for the sector a bit.

All said, be prepared for a fairly volatile trading session for today. Expect the markets to open slightly in the red and trade with a fairly downward bias. Wait for the key results to unfold for further cues. I leave you with a key comment from D Subbarao on inflation as reported in the Economic Times today “it’s a decline from the peak but it is still quite high, when growth is slowing down you can stimulate the economy either by monetary easing or by fiscal stimulus. But both monetary and fiscal side have no room for stimulus. So that is the big concern”. Concern, certainly, because this is like directly hinting towards what you can expect from him on the 29^th of January.