A Weak Opening And A Nervous Day

The markets are always on the lookout for fresh triggers. After the results season, all eyes are now trained on macro factors. The March quarter GDP numbers that are to be announced today will be the first in the set of data that will come up over the next few weeks. According to reports, a poll conducted by Reuters shows that India’s GDP for the March quarter is likely to expand by 4.8 per cent in the March quarter on a YoY basis. This is slightly better than the 4.5 per cent growth that we recorded in the preceding quarter. What this will really translate into is the worst ever annual growth for the Indian economy in a decade. Considering that even this piece of data has been discounted by the market, the RBI’ monetary policy review becomes the next important milestone. After a rather dull results season, which was anyways likely to be that way, hopes rested on the RBIs monetary policy where an interest rate cut is being expected. Will that materialize? Looks unlikely to happen if you heard what the RBI Governor said yesterday.

So what all this essentially hints at is that, the next few days or rather a week or so is not probably going to be so good for the markets. The week which began with a decent run up will most probably end with a weaker on cues emanating on the domestic front. Amidst this gloom, lies an interesting development. According to the F&O expiry statistics FIIs, the primary drivers of the Indian markets, have let their futures positions to expire and turned money to the cash market with an eye on the rising dollar. There is at least some comfort in this considering that the most important constituent of the markets are still pumping money into stocks.

It isn’t looking to be a very encouraging day for the markets at least on the domestic front. Are there any better cues that are emanating from outside? European markets ended higher yesterday taking cues largely from economic data that came out of the US. US employment figures were not very encouraging with 10,000 more people, than were expected, having filed for benefits taking the total number to 354,000. On the growth front, first quarter GDP growth estimates have been revised downwards to 2.4 per cent from 2.5 per cent while another important data point that came up was the number of unsold homes which went up by 10.3 per cent in April compared to the same period last year.

What all this essentially means is that, the Federal Reserve is unlikely to taper down its bond buying exercise and hence liquidity which has been driving markets globally is here to stay. The US markets too reacted in a similar fashion with the Dow and the S&P ending in the green. The latter is  now headed for a rise for the seventh straight month.

Closer to home, Asian markets have opened mixed this morning. Japan, which has been leading the way for the Asian lot, opened quite weak but has recovered sharply. It is currently trading very close to 2 per cent higher levels from yesterday. Hong Kong, China and Singapore are looking weak, while Korea, Taiwan, Malaysia and Indonesia are trading in the green.

All in all, it looks like the Indian markets are headed for a weaker opening today following some really gloomy news flows on the macro front. The GDP data that will come out post market hours is likely to weigh on the market sentiment. Adding to the woes is the RBI governors overall skepticism about the grounds on which the economy stands and fears that he has about inflation coming back soon will keep the markets in quite a nervous state today. post expiry, traders are likely to take a measured call on the market at least for some time now. It could be a good thing to play it safe by paring expectations a bit.