A Strong Open And A Sustainable Up Move Expected

This is how the markets will baffle you at times. From a day when the sentiment seemed to be so dull and boring, it suddenly changes character based on a couple of news flows to play catch and rises with a renewed vigour. In fact this reflects on how the markets just latch up to any news, good or bad, according to their convenience. Germany came to the rescue of a deteriorating market sentiment globally. Data pointing towards a stronger investor sentiment in Germany boosted European markets. The ZEW economic expectation index was up 16.7 points at 48.2 in February, against expectations of coming in at 35 points. This led to broad-based rally across the European markets and also lifted sentiments here.

Overnight, US markets too took cues from the European sentiment booster and hit fresh five-year highs. Corporate activity especially on the mergers & acquisitions side has been the primary focus areas for markets in the US over the past week and half or so. With the results season now behind us, the spotlight now shifts on other triggers. For the US, the coming up sequestration (automatic spending cuts) will now be a focal point. All eyes will no look at how the Congress comes up with a deal on this issue. But right now, the markets are focusing more on any positive cues that are coming their way. Yesterday’s market action was a classic example of this.

Asia carries Europe’s optimism further today. Markets here have opened rather strongly this morning and continue to trade that way. Japan leads the way for its Asian peers after its trade data showed that exports were growing at a faster clip than expected. Japanese exports were up 6.4% in January. The worrying part however is that its trade deficit hit a record level of USD 17 billion. While the Japanese Nikkei is trading almost one percent up, Hong Kong and Singapore too are doing well. Except for Malaysia all other Asian markets are on a strong footing today. The Chinese though are trading a bit slower than expected but are still trading in the green. The SGX Nifty is trading up 17 points indicating towards the positive bias that the Indian markets will enjoy today.

The Indian markets have already reacted to what Germany brought to the table yesterday. The second half of trading very clearly took away all the pessimism and gloom that was surrounding the markets over the first half. Following its other Asian peers and overnight market action in the US, markets here are likely to open strongly today. Frontline indices could see a gap up opening and trade stronger through the day.

The markets will continue to follow such kind of cues at least for the whole of next week. The Budget session is being keenly awaited and expectations are being voiced loud and clear from various quarters. The government is signaling its intent of following a strict code to keep its finances in shape. The first of these signals came out after it scrapped its borrowing plan for the month of February. Speculation is now ripening about how much lenient the budget would be. But these speculations cannot be used to play the market right now. It is better to stick to a stock specific approach and wait and watch until the real result is out.

As mentioned earlier, today will be a good day for the markets. A gap up opening is likely to sustain and take the markets higher. This change in sentiment will lead to markets trading with a positive bias at least for a better part of this week. As for now it would be good to reiterate a stock specific and news driven approach to the markets.