A Solid Open, But A Volatile And Nervous Day Ahead

A rare constellation of stars happens only once in a while. Some of these are really looked upon with great skepticism by many. So much, that at times, all business is given a pass so as to avoid any ill effects of such a constellation. The markets are to witness such a configuration of events today. A day like this is very rare. While on one hand you have the most awaited budget of the decade, on the other you have the F&O expiry. All this suggests just one simple thing – loads of volatility throughout the day. In fact, the way the budget pans out, could make or break the future of the markets.

In between, yesterday the markets bounced back in a smart manner after the carnage that had left global markets bleeding. At the core of this carnage was the political mess in Italy. That nation (Italy) has come to haunt us in more than one ways for quite some time now.  But this is probably not the time and the place to discuss Italy and its effect on India. We talk markets, stocks, investments and wealth creation and there is too much on that front right now to discuss, debate and act upon. The goody picture painted by the Economic Survey helped buoy the market sentiment over the second half of yesterday.

On Monday, US markets reacted sharply to the political happenings in Italy (read Euro zone). Yesterday, the European markets were reportedly trading positive taking cues from economic data points emerging from the US. Positive housing data was the main pusher. But what really helped, not only Europe, but also the US markets to bounce back was, the US Feds’ decision to defend the Central Bank’s quantitative easing policy. US markets saw the best of 2013 yesterday. The indices are hovering around record highs which analysts believe should extend the rally somewhat more into the future.

So the market mood globally is to carry forward Ben Bernanke’s reassurance on the monetary stimulus front. This brings in a fresh wave of optimism to begin the day with. In fact, our Asian peers have already latched on to the overnight positive mood of the US markets and are trading higher this morning. All except for China are in the green. Japan, Hong Kong, Taiwan, Korea, Singapore, Malaysia and Indonesia are currently trading up in a range of half to one and a half percent each. The SGX Nifty is currently up by a good 43 odd points, which can be taken to be a signal of where the Indian markets will open today.

You could see a good gap up opening today. The sharply positive open could see markets trade strongly but only up to the point of time the Finance Minister rises to present his budget. Thereafter it will naturally be a game driven by the words coming out of the FMs mouth. While all ears expect good things, there is no shying away from probable surprises. You have a Finance Minster who works very closely with the capital markets in mind. Hence, there is a lower probability that he may want to spoil the party.

It is one of those days where someone with a good risk appetite should trade. Risk averse investors better beware and stay away at least for the first half of the day lest you may get clobbered if suddenly something negative springs out of the budget. Treat this as a word of caution rather than skepticism. For now, it looks like there could be a good gap up opening. Stay tuned in with us for a real time analysis of the Budget as it gets presented.