A Positive Open & A Calmer Week In The Offing

A rather tumultuous week has just past by. It carried the negative sentiment of the preceding week with it in the past week as well facing a consistent decline for a major part of it. Nerves finally calmed down towards the end, taking cues from the improving global sentiment. The positive PMI numbers set in a relief rally throughout global equity markets. The result was a good 3% improvement for the Indian markets as well.

The Rupee which has been the biggest worry for the markets over the past couple of months (in fact even more) has been able to come off its lower levels. After hitting a high of more than Rs 65 to a dollar, it came off to trade around the Rs 63 levels towards Friday last. Now, this is the biggest relief for the markets. Is the strengthening of the rupee really sustainable? What could have changed overnight for the rupee to strengthen by more than 2% on a single day (its biggest single day rise over the past one year)? Well, it would be a better idea to focus on the positive side, than dig into why it happened?

Talks of a lower CAD by financial agencies than was earlier projected bring in some positivity to the markets as we head into a new week. The Finance Minister has been reported to be committed to containing the CAD at levels as were projected (USD 70 billion) and funding it safely. The Government has been making an all out effort to calm the markets through various measures. But remember, the markets have a mind of their own. Unless there is a complete confidence of how and when these measures are likely to yield results, there is very less chance that it may fall for all the pep talk. Since the measures initiated by the government are slightly long term in nature, the immediate impact on the markets is likely to be far less as is expected to be.

Meanwhile, the improvement in the market sentiment was a global phenomenon last week. Better than expected economic data points emerging for the European region have kept markets on the positive side out there. The German and the UK economies are growing, though modestly. Consumer confidence in the Euro zone too has been on the rise. All this is reflecting well in the markets out there.

The US markets too ended the preceding week on a positive note. A slightly disappointing data coming out of the existing home sales report has actually propped up markets there. It is being interpreted as a signal that the Fed would revisit its stance of cutting down on bond purchases sooner than was expected.

Back in Asia, markets have opened the week on a positive note and continue to trade in the green. Except for Indonesia, all others are trading above their previous close. As said earlier, hopes of the Fed going back on its stern stance of tapering the bond buying is helping markets globally today. The Asian markets are up an average half a percent today with Hong Kong leading the pack with a 0.74% rise. The Japanese Nikkei is hovering on the brink while the Shanghai Composite is beginning to gain strength. Singapore is trading 0.35% above its previous close and the SGX Nifty is up 22 points.

All this fairly points towards a positive opening to the day and this week for the Indian markets. The stability of the Rupee will however decide on the future course, but there too expectations are on the positive side. With a whole lot of money waiting on the sidelines, it could well be a good trading week, provided no new shocks emerge on the macro front.