A Green Open, But A Limited Upside In The Offing

An action packed week kicks off today. While on the domestic front, the most awaited trigger for the markets; the Union Budget is in the offing towards the end of the week, there are a host of events on the global front which are likely to add that extra tinge of volatility. The US sequestration has taken centre stage. Automatic spending cuts which are slated to come into effect towards the end of March are beginning to worry the markets not just in the US but globally. So after the ‘fiscal cliff’ it is now sequestration that will keep all eyes glued to the US markets for further cues on where the global economy is headed.

Europe too goes through its own set of news driven and political challenges. Moody’s downgrade of UK is sure to weigh on the markets this week.  The first reaction to the markets to this piece of data is likely to set in today. Economic data points emerging from Germany have kept the European markets buoyant for a major part of last week. Will they continue to support them going ahead too? Looks unlikely in the face of the new developments and challenges that come the European markets’ way this week. Elsewhere in Spain, fears of Berlusconi’s reelection to the highest office have raised concerns of impacting the markets. If re-elected his anti-austerity stand is likely to have a negative impact on sovereign finances. Voices of concern on a economic recovery in Europe are anyways getting louder. All this is definitely going to keep markets globally on the tenterhooks.

Meanwhile, Asian markets are trading as though they are oblivious and completely insulated from what is happening elsewhere in the world. Except for Taiwan and Korea all others are trading in the green. Strength however is being witnessed only in the Japanese markets. The Nikkei is trading up by almost a per cent and a half followed closely by the Shanghai Composite which is up by a per cent. All others are trading in moderately positive manner. The SGX Nifty too is trading in the green, but only by around 6 points.

Where does all this take the Indian markets today? Last week has closed on a rather weak note. In fact the strength that the markets had gained over the beginning of the year has been seen dissipating for varied reasons as we move ahead. Corporate results or the December quarter of 2012 are done with. The next big trigger comes in this week. But that too is almost towards the end of the week. Until then a better part of the week will be dominated by news flows on the domestic and the global scene. The way Asian markets are panning out today, looks like we are all set for a positive opening. The euphoria over the new banking license norms will also add to the air of positivity. But the optimism may not last long. There are larger macro worries to be taken note of. Too much of ignorance of these factors is not possible. The first half of the day is likely to remain green. The second half will depend on what Europe does at opening.

For now, you will see a positive opening but only with a limited positive bias. Largely the day looks set for a rather cautious and news driven trade.