A Positive Open To The Week Ahead

After a rather disastrous start to the week, markets found an upward trajectory in the latter part and the move that followed was nothing but baffling. A lower than expected inflation number provided a solid bounce to it, with frontline indices not only recovering the loss that had occurred but also surpassing key levels. Well, that is the market for you. It has its own mind and will latch on to the best possible scenario no matter how significant the factor looks. Of course, a lower inflation number is not just any factor. It is THE most important factor for the markets today. On it hinges the RBIs monetary policy to come in June. With the number falling below a level which is considered to be the central bankers comfort zone, expectations of a interest rate cut are now gaining ground again. It may look like the same story being repeated all over again, but this time its different. While you would like to believe all this, lets not lose sight of the fact the ‘looks different’ theory has failed many a times in the past. This is just a word of caution against any irrational exuberance.

Meanwhile, global cues remain to be positive with the US markets recording gains for the fourth straight week. Economic data is pointing towards a healthier environment and this is giving the Dow and the S&P a new fillip every passing week. Both these indices are currently at their life time highs and there seems to be nothing which could disturb their upward move at least for now. The threat of the Federal Reserve pulling back some of its asset purchase programme as the economy continues to improve is putting investors in a fix at times. But a performing economy is always a much better piece of news than anything else. This is what is keeping the mood upbeat among investors.

If US is providing the much needed support to a buoyant global markets, Europe isn’t far behind. European stocks have been reported to have risen to their highest levels since 2008. Economic data points emanating from the US have been helping the European stocks which have been leaning for cues on that part of the world.

A look at our closer peers (Asian markets) enhances the confidence of an upbeat week ahead. Markets across Asia have opened well this morning signaling a good start to the week. Not a single Index on the Asian charts is presently even closer to getting into the red. The Japanese Nikkei and the Hang Seng (Hong Kong) are showing strength as usual. China, Indonesia, Malaysia, Singapore, Korea and Taiwan too are trading well in the green zone this morning.

The one principle factor that is presently driving market sentiment globally is liquidity which is seen to be in plenty by investors today. In fact, reports suggest that a weaker economic outlook in some parts of Europe are also been looked upon as something that will trigger monetary easing and consequently more liquidity in the markets. Well, as they say, anything that is good is welcome. So as far as the markets are in a good frame of mind, any reason for it to be so should be okay with investors.

All in all it looks like a good start awaits the markets this morning. Markets seem to be ready to start off from where they ended last week. There is nothing in the headlines which warrants a cautionary word early morning today. You could well see a positive open and quite but good trading session to start off the week.