Markets To Open The Week On a Negative Note

The markets start off the week with absorbing the fuel price hike that was brought into effect on Friday midnight. The past week mirrored events on the macro front. From inflation and GDP growth on the domestic front to that on the European shores, weakness seeped in through the later part of the week keeping sentiments rather cautious. Disappointing results from some of the big corporate houses towards the end of the week added to the pressure on the markets. The results season for the December quarter of 2012 had begun with a bang but seems to be ending with a whimper.

On the global front the expected cuts in government spending in the US are coming closer. This has once again put markets on a tenterhook there. The impact of a highly volatile US markets is always felt globally. The first to react are always the Europeans. Actually Europe does not have anything to depend on of its own right now. Growth in that part of the world has been wavering badly. The effects of the sovereign debt crisis in that region will not dissipate so soon. The way the European markets behave does impact our markets too, though to a lesser extent.

Asian markets have opened on a mixed note today with Japan trading higher than expected. The G20 meeting over the weekend which remained largely silent on the move of its currency seems to have bolstered markets there. Except for Korea, Malaysia and Hong Kong all others including China are doing well this morning. So what does all this mean for the Indian markets?

For today, there is more of a negative bias to the markets, beginning with how they would react to the increased fuel prices. You could see the markets open in the red and trade in a very tight range. There is a little chance that you could see a very deep reaction on the down side to the hike in fuel prices as this is now expected in the normal course. In fact one has to take a longer term view of these price hikes rather than react hastily.

Right now the biggest trigger that the markets are awaiting is the Union Budget. As we get closer, expectations and denials on that front will drive the markets to a large extent. But that is a story spread over the whole of next fortnight. Meanwhile the RBI seems to be signaling that an easy monetary policy cannot become the norm especially with inflation remaining at higher levels. D Subbarao has been reported to have reiterated this stand at a briefing in Moscow on Saturday. If that puts you off here is something to cheer about. Montek Singh Ahluwalia is reported to have said that the Indian economy will grow at anything between 5 – 5.5 per cent in the current fiscal and could touch a growth rate of around 7 per cent in FY14.

You take your pick on whether to go with the positive or the negative, but one thing is certain, the fundamentals of the Indian economy are quite in place and even foreigners are reiterating this. FIIs have reportedly pumped in a humongous USD 8 billion in the Indian stocks markets so far since the beginning of this year. FIIs have invested a net Rs 21058 crore in equities in February alone taking their total investment to 43117 crore for the year so far. So you broadly know where the markets is headed over the longer term. Coming back to what happens today, expect markets to trade with a negative bias after a red opening.