US Growth Numbers and F&O Expiry: Signs Of A Volatile Day

There has to be something that will come in the way of the markets and spook them, when everything seems to be going good. Economic growth in the US has come completely in contrast to what was expected. The US GDP is reported to have shrunk 0.1% for the fourth quarter, when it was actually expected to grow by about a per cent. The US markets reacted to this set of economic data the way they should. The Dow and the S&P 500 ended the day down 44 and 6 points respectively.

The jitters of a poor economic showing in the US during the fourth quarter were earlier felt on the European markets as well. Almost all of the frontline European markets reacted negatively to the weakness of the US economy with the FTSE having lost a quarter of a per cent and the CAC and the DAX losing almost half a per cent.

Asian markets opened mixed and were trading in a tight range this morning. Except for Singapore and China all others began the day on a slightly shaky note and were found trading negative. The SGX Nifty is trading marginally in the red.

So, that brings us to the point, what do we expect the Indian markets to do today? For starters, with the F&O expiry for the month slated to happen today, markets are anyways expected to remain volatile. Corporate results continue to pour in, and, as we have been saying trading has more or less been stock specific depending on how individual companies are faring. After the RBI policy, the next big trigger for the markets will be the budget to be announced next month. Until then, most of the market action will continue to be centered on individual stocks.

Taking cues from overnight developments in the US and the way Asian markets have been trading so far, we are likely to begin the day on a flat to negative note. As we said earlier, the market is likely to remain largely volatile in trades today. The bias remains on the negative side. The announcement of the US continuing with its USD 85 billion bond buyouts could lend some support on the macro front. Growth worries apart, this clearly signals that the liquidity surge will continue at least for some time going forward. If that money finds its way to the Indian markets, you probably know what to expect. For now, let’s focus on what happens today. Stay cautious and have a stock specific approach. The market will react to the US growth figures and take note of what its other Asian peers are doing.