Markets May See A Volatile Session

A new fiscal is set to start today. Will this be a good year for the markets, is the question among the traders and investors? The last fiscal saw high volatility in the markets with the last three months erasing most of the gains made in the earlier nine months of the fiscal. The political stability of the government has cracked a bit and the European issues have also resurfaced. The GDP growth of the country has touched to a decade low in December quarter and at the same time current account deficit has widened to record high of 6.7% of GDP. All these factors at this time do not promise a good year for the markets.

The volatility index (VIX) of NSE, rose to 1.8% in the March quarter to 15.22 which indicates that the trades will mostly be volatile in the near term. The last three months have proved to be detrimental for the markets due to the change in political and economic scenario. The Cyprus bailout and its blow to its banking sector impacted the global markets. Despite this, the US markets touched a new high which would take a few by surprise. The surprising factor for the Indian markets is that the FIIs have kept pouring money in the Indian markets. FIIs in the March quarter bought Indian equities worth USD 10.15 billion. In 2012 FIIs bought Indian stocks to the tune of USD 24.55 billion, one should not forget that the Sensex gained 26% in the calendar year 2012. The FIIs seem bullish at this time. In fact research reports of some foreign brokers indicate that the markets may touch a new high by December 2013.

Having said this, how are the markets expected to trade in the day one of the fiscal year.  Most markets in Asia, the United States and Europe were closed on Friday for Easter. The Indian markets were too closed on Friday for ester holidays. On the last trading session on Thursday, the markets managed to end in positive territory. The Asian markets have mostly opened lower today. Europe will again be closed today for Easter holidays.

The most importantly markets will track the CAD numbers that came on Friday. The CAD for the December quarter is at 6.7%, higher than the expectations and widely out of RBI’s comfort zone. The higher gold and oil imports and lower exports at the same time, took CAD to 6.7%. The GDP of the country in this quarter was lower at 4.5%. The RBI and government are now expected to take measures to cut the CAD. The finance ministry has said that the CAD, though high, is not surprising as it has been fully financed without drawing upon the foreign exchange reserve. The finance ministry also said that going ahead it will be able to finance the CAD through sufficient foreign inflows. High CAD is however a matter of the concerns for the markets as it puts the pressure on rupee.

Ahead today India’s manufacturing data is expected. Besides manufacturing data from various countries including that from China and US is also expected today. Markets will mostly track improvement in the manufacturing sector and hence any uptick there will be seen positively by the markets. All in all, one can expect a volatile session with lower start on first day of the fiscal 2014.