A Flat Open And A Downward Bias To Remain

Look at any time period over the past one month. You will realize that the markets have been in a firm downtrend. Looking at the way the markets have been behaving over the past one week or so, it seems as though the pain is only getting worse. In the past five trading sessions, the markets have lost almost five per cent. The Sensex is down 814 points while the Nifty has lost 253 points. Markets tanked badly, particularly in the second half of the day. Well, the markets sinking further is a bigger possibility over the next couple of weeks as corporate results start coming in. Your first big surprise could come as early as Friday when Infosys puts up its performance for the March quarter on the desk. A not-so-great corporate performance is anyways a given. It has already been priced in.

A bigger worry is the reason attributable to the fall. Foreign investors have begun getting jittery and have been selling heavily. Now this could mean a lot from every perspective. A short term pull out means drastic declines like the way we have been witnessing over the past three or four days. Will it continue into the medium term as well? There is every possibility as the main reason that the FIIs are selling in equities is over the political uncertainty that has presently gripped the country. An early election or a fluid situation in the capital could mean no reforms at least until the next general elections. This does not bode well from the markets perspective at all. The consequence of such a possibility getting priced into the markets is already there for us to see. Will the political situation improve? It could be at least some time before clarity emerges on that front.

Getting back to what happens today, the European markets ended in the green yesterday following some good set of numbers emerging from American companies. Chinese inflation data is another factor that has been a talking point across markets globally. A benign inflation situation in China is being looked upon as a major trigger by markets across the globe.

US stocks too rose in overnight trades following some good corporate results that were announced during the course of the day. Results from corporate America are likely to look good in the light of the fact that most of the companies out there had presented a muted guidance for the first quarter (Jan – Mar). Any upside from that guidance will obviously be taken to be a good sign for the markets to cheer. The Dow touched a record high yesterday pushing up market sentiment across the board.

Are Asian markets trending in a way that could well be seen to be taking cues from what happened in America this morning? It surely looks like. Except for Singapore all other markets have opened in the green and have been sustaining at higher levels as compared to yesterday. Of course the rate of change today is certainly something that can best be called as mildly positive. The Japanese Nikkei is up a 100 points but the Shanghai Composite is trading up just 4 points even as we write this report. Hong Kong, Indonesia, Malaysia, Korea and Taiwan look to be in a good shape at least for today.

One of the most nagging worries for Asian markets over the past month or so has been the standoff between the Korea’s. The tussle between North and South Korea is throwing up new geopolitical challenges every day. Unless this gets subdued markets could remain on tenterhooks in the near future.

What does all this mean for the Indian markets? There are no clear cues emerging from global developments for us to depend on. Corporate earnings are the only factor to watch out for in the current context. But the impact of this factor too will begin being felt only once the big boys start reporting on what they did in the March quarter. The results of Infosys on Friday will be the most keenly watched as it is likely to set the tone for the markets to react to corporate performance. Hence, today could well be another insipid day for the markets with the trend remaining largely on the down side. But the way they have given in over the past five days could also mean that there could be some bottom fishing attempts so to say. Overall it could be flat opening with a largely downward bias for the markets.