Global And Domestic Cues May Trigger Up-Move

Today seems to be a good day for the Indian markets considering various global and domestic factors. Yesterday the markets were edgy over global developments. There was a weak opening in Europe and nervousness in Asia ahead of the outcome of the two-day meeting of the Bank of Japan (BoJ). This resulted in a weak background for the Indian markets to operate in. Moreover, the broader indices were heavily impacted by stock specific movement. Hindustan Unilever was disappointing when it came to results and the stock saw a downfall of 6.2% intraday. It recovered a little before the day ended and closed lower by 2.88%.

So what’s changed today? There was a bunch of heavyweights announcing their earnings yesterday in the US. IBM and Google saw an improvement in earnings and this led to a rise in their stock prices. Upward movement was also seen in the prices of RIL and Dell. These movements supported the US markets as they opened after a day off on account of Martin Luther King, Jr. Day. Positive sentiment spread across Europe too as European Central Bank President Mario Draghi said that the ‘darkest clouds over the euro area subsided’.

Although these moved are supportive enough of an upward trend, some amount of negativity has been added due to the disappointment over yesterday’s policy overhaul by the BoJ. The BoJ adopted a target to achieve 2% inflation and also said it will conduct asset purchases on an open ended basis to boost monetary stimulus. What disappointed investors was the fact that the open ended asset purchase programme would take effect from January 2014, once the current programme ends.

Domestically, the Finance Minister promised Foreign Institutional Investors (FIIs) that the fiscal deficit target of 5.3% will be adhered to. Also, he aims to reduce the deficit by 60 basis points in each year for the next four years till it reached 3%. He also aims to have the country’s GDP growth rate to reach 8% by FY14. Moreover, to make investments more attractive, he said that foreign investors would be allowed to hold up to USD 15 billion of government bonds and USD 25 billion of corporate bonds. The one year lock in period on holding infrastructure bonds would be eliminated as well.

Overall, global and domestic cues have set a background for today’s market operations to be positive. We can expect a strong opening for the markets today. Although there are some major results today, there is a lack of announcements from heavyweights, thus ruling out any stock triggered result-centric movement for the day on the broader indices.