Opening Looks Mildly Positive

Volatility in the Indian markets had been on a rise prior to the release of inflation data, which gave more clarity on what RBI’s probable steps would be in the upcoming monetary policy review scheduled to be held on March 19, 2013. This week’s Indian VIX (volatility index) had risen by 22.14% till Wednesday. This however dropped by 9.51% yesterday as WPI (Wholesale Price Index) numbers came out and the markets became more firm on their hopes over a rate cut.

February 2013 WPI inflation came in at 6.84%, which was higher than street expectations of 6.5% and that in January 2013 which was 6.62%. However, a majority of this was on account of fuel inflation, which has been on an upward curve since the government’s decision to deregulate diesel prices and lower subsidies on LPG cylinders. Apart from this, categories like Primary Articles and Manufactured Products saw declining inflation. This trend shows the release of pent up fuel prices lifting the inflation numbers. The markets thus have been positive of a probable rate cut. With this, the Sensex and the Nifty covered the previous day’s losses and ended the day higher by 1.07% and 0.99% respectively.

Although the day was positive, there was considerable amount of nervousness and volatility seen before the release of these figures. To add to this weakness was Cobrapost’s expose showing alleged banking irregularities to rotate money within the system. This led to some pressure on the markets in the beginning of the day but the markets soon recovered.

Overall, the day seems positive due to the above factors. Moreover, the global sentiment has been positive. The Labor Department reported yesterday that initial applications for employment benefits declined by 10000 to 332000 last week. This report led to a wave of positivity in the markets and led to a tenth consecutive day of gains for the Dow. The S&P too is trading near record high levels.

This data has also led to a positive opening in Asia. Japan is trading higher by 0.58%, Singapore by 0.47% and Asia Dow by 0.58%. However, the Hang Seng soon turned negative due to pressure from real estate stocks.

Overall, global and domestic cues have been indicative of a positive opening today.