WPI Numbers Today, Markets To Be Jittery

The markets have clearly entered a downward phase as economic data of higher-than-expected growth and high inflation have together lowered the possibility of a rate cut by the RBI on the monetary policy review scheduled on March 19, 2013. Resulting out of this sentiment, markets ended the day lower yesterday by a tad more than 1%. This is likely to continue adding downward pressure to the markets even today as fresh comments from the Prime Minister and RBI Governor spurted in yesterday.

Prime Minister Manmohan Singh said yesterday that robust growth would be restored in two-three years. At the same time, at a separate event, RBI Governor D Subbarao said that reviving growth to earlier levels would only be possible if the government is able to bring about structural changes. These comments give an additional base to the macroeconomic data released this week. It would further dampen rate cut hopes and it would be reflected in the performance of equities.

Globally, the US ended with small gains and the Dow Jones Industrial Average sealed a nine-session streak of gains. This was supported by stronger-than-expected retail sales data for February 2013. However, most of Asia is weak. Japan has been showing strength as investors have been welcoming signs that the government’s anti-deflation stance is gaining traction.

The phase of weakness caused by structural issues and monetary policy will cause markets to frail on opening today. Moreover, markets are likely to be jittery till the announcement of the Wholesale Price Index (WPI) scheduled to be announced later today. This figure will give some additional cues about what the likely interest movement could be like on RBI’s monetary policy review. Till then markets are expected to be range-bound.