A Strong Start On The Cards

I had expected the market to open in the red and continue to trade in a tight range with a negative bias yesterday. However, things turned out to be quite different particularly during the later part of the day. After some amount of volatility following the reading of corporate results for the previous day and what was expected on that front for yesterday, they just took off to close with really good gains. What propelled the markets in the post lunch session of trading was the government action on the reforms front.

The government seems to be in no mood to go back on the reforms front. It announced the much awaited diesel price hike yesterday, allowing OMCs to hike prices by 0.45 paise per month. It has also revised the cap on the number of subsidized cylinders that consumers were entitled to, from the present six to nine. All this obviously had a desired impact on the markets. Just as were beginning to believe it was the end of good times that began with the New Year, the markets took off to a new start on the higher side. So what should you expect from the markets today? Will they continue with their winning streak? Are there any pressure points that could pull them back? Will the week end on a positive note? Here are some quick answers before you get on to your trading desks.

For starters the US markets yesterday witnessed a solid rally after good data points emerged on the housing and jobs front. The S&P 500 ended the day at its highest since 2007 while the Dow and Nasdaq too followed suit, ending with good gains. In fact, market sources in the US seem surprised at the quantum of positivity in these data points, though some positive movement was factored in. This overnight performance of the US markets obviously spells good for Asian markets today. It is already showing in the way Asian markets have opened and are trading firmly.

Japan continues to shine with the Nikkei trading up by more than 2%, after the dollar hit a new high to the Yen for the first time since the middle of 2010. China, Hong Kong, Singapore, Korea and Taiwan too have opened in the green and continue to trade positive following the general bullishness that surrounds markets for today.

Needless to say, Indian markets are likely to take off from where they ended yesterday. As I sum up on what you can expect for today, the SGX Nifty is seen trading up by more than half a per cent. This translates into a good 25 points and indicates a fairly strong opening for the Indian markets today. The market is likely to absorb yesterday’s government action and at the same time watch out for cues coming from corporate results.

There are some big numbers that would be coming out today (read the Index Trends and Stocks In Action for more on this) and most of them will indicate toward the overall health of the sectors they come from. This will keep anticipation levels on the higher side. Europe is likely to take cues from the strong overnight close of the US markets, which essentially means a good show there too. This will lend further strength to the bullish environment in the post-lunch session and is expected to keep the good times going on for today.

I would sum up by saying, do not get so involved in the macro developments that have happened yesterday that you tend to lose sight of the micro factors (corporate results). Monday will be a new week and will again bring the micro level factors into play. For now, have a nice trading day.