India Went Up When The World Went Down

The week started on a rather ghastly note for global markets on account of the heavy downfall in commodities and equities. The situation has changed slightly with a host of economic data flowing in. While there seems to be positive sentiment in the US, Europe continues to lose out. How will the situation pan out for the Indian markets?

Economic reports in the US had housing starts rising by 7% in March 2013, fall in consumer inflation 0.2% and an increase in industrial production by 0.4%. This spread about a wave of optimism post a couple of very disappointing sessions on the street. Robust economic data was also supported by a good start to the earnings season. Results of Goldman Sachs, Coca-Cola, BlackRock and Johnson & Johnson beat market expectations.

This turned out to be a good trigger for paring of losses. The Dow, Nasdaq and S&P ended the day higher by 1.08%, 1.51% and 1.46% respectively. Gold too recovered with the June futures contract ending the day at USD 1387.40 an ounce, higher by USD 26.30. Oil too edged up a little, gaining about 1% to trade at USD 88.72 to the barrel.

Europe however traded in the red for the 3^rd consecutive day. The German ZEW economic sentiment indicator dropped to 36.3 in April 2013 as compared to 46.5 seen in March 2013. This is way lower than the previous reading and market expectations. This added to investors’ worries which were already on a high because of lower-than-expected Chinese GDP and low New York Fed’s Empire State Index.

While the world was scarred because of weak economic data and a horrific decline in gold prices, India was cheering its way ahead. A drop in the prices of both gold and oil would massively ease out the current account deficit for India. It would also help reduce oil under-recoveries, in turn reducing the need for fuel price raises that have contributed massively to inflation. This resulted in the Sensex gaining 2.11% to 18744.93 and the Nifty going up by 2.16% to 5688.95.

Apart from being affected by lower gold and oil prices, Indian markets will also be shaped by the result announcement of Reliance Industries, which was announced post market hours yesterday. Overall, the day looks like it will start on a positive note.