A Flat Opening With A Negative Bias On The Cards

It’s been a fairly good opening to the markets after a rather shaky previous week. Monday began with some volatile trading but ended on a stronger note with the frontline indices showing some good gains. Corporate results continue to be the dominating theme. After Infosys kicked off earnings season on a dismal note, it was Wipro’s turn to bear the brunt of a rather poor showing. The stock tanked on Monday following its mediocre results and was down 8 per cent on close. Is the IT story really over? Or are these numbers just a blip on the radar? It would take least some time before this becomes clear. Voices have been heard, saying you could write of Infosys but not IT. Hope this turns out to be true. Not that we do not want Infosys to bounce back, important is, we would love to see IT continuing to be the new age sectoral space. Other results too have not been very great. But, the market is anyways discounting a poor results season. So there isn’t much to read between them.

Meanwhile, outside of results, markets have been taking cues from global happenings. As mentioned many a times earlier, globally, markets are going through a very volatile phase reacting to whatever data comes out. So, while a small improvement on the employment front in the US sparks off a good rally, a slightly weaker housing data sees markets caving in.  Europe particularly has been riding on whatever happens elsewhere in the world. Fortunately, the re-election of Giorgio Napolitano as president of Italy over the weekend sent some positive signals putting to rest many weeks of uncertainty and giving rise to hopes of a more stable outlook. But data on US home sales front disappointed markets pulling them down. The see-saw continues and is expected to do so going forward too.

In the US, after a very bad week, markets came back to life. The contemplation about the Fed induced liquidity driven rally coming to an end has been keeping the US markets on the edge. This was further complicated by a declining trend in the existing homes market. Will the Dow and the S&P resume their secular up trend from here on? Probably, at least until something new emerges to spook their upward journey.

Asian markets have opened weak this morning. Preliminary data of the Chinese PMI has pulled markets down with Hong Kong and China being the worst of the lot this morning. The Shanghai Composite and the Hang Seng were trading down between  1-1.5%. Every markets including Japan is in the red today. the G-20’s indirect support to Japanese monetary policies has put in a whiff of positivity in the Asian markets yesterday but all this was overshadowed by the rather disappointing data from HSBC about manufacturing PMI for China.  The preliminary readings suggest that manufacturing activity in China is slowing down. The Index fell to a two-month low of 50.5 from 51.6 in March. Reports suggest, it was also well below the 51.5 that was forecast by Bloomberg.

If you think the Indian markets will trend according to their other Asian peers, then it could rather be a bad day in the offing. The impending F&O expiry will further add to the volatility of the markets today. Is there anything that could lend an air of positivism? Well the government seems to have swung out of slumber on the reforms front. According to reports, the Government has cleared 25 oil blocks and 13 power projects worth Rs 33000 crore. But the bad part is, it has deferred a decision on coal price pooling. The RBI on the other hand is reportedly learnt to be ready to allow 7 – 8 new banks. Certain riders too are under consideration. All this is a mix of data points which could see the market open on a rather mixed note this morning. All in all, you could see a flat to negative open and trades with a bearish bias. The bad air is far more contagious than the good one. Right now you rather be safe in the markets until some clear positives come its way.