As US Debt Deal Seems Near – Global Indices Soar

It was expected to happen and it did happen. After a logjam of around two weeks the U.S. Senate voted to reopen the government and raise the nation’s debt limit. The US Senate announced a last-minute deal on Wednesday to avert a historic lapse in the government's borrowing ability and a potentially damaging debt default, and to reopen the government after a two-week shutdown. The only worry has been, even if the Senate and House of Representatives manage to overcome procedural hurdles to seal the deal before Thursday - when the Treasury says it will exhaust its borrowing authority - it will only be a temporary solution that sets up the prospect of another showdown early next year.

However the impact of the same has been Very much positive with US equities moving upwards. The Dow Jones Industrial Average closed up by 1.34% at 15373.83. Even the S&P and NASDAQ gained by more than 1%. While the US Equities have moved upwards the Gold and Copper prices also advanced. As for the European Markets, earlie4r the indices witnessed a bit of decline but the positive cues from US helped the indices recover. 

All Asian Indices are trading in green Nikkei being the highest with more than 1 % gains. All other leading Indices Strait Times, Hang Seng and Shanghai Composite are also in green with significant gains.

As regards the Indian markets, we expect the Indian markets to open on a positive note. Apart from the positive cues from the global markets there are positive cues on the domestic front also. The financial results for the September 2013 quarter have been till date better than expectations. After Infosys even TCS has put in a stellar performance. TCS announced results after market hours on Tuesday and markets were closed on Wednesday. Today we expect a positive move in IT stocks.

Even Bajaj Auto has posted strong financial performance backed by the exports. The company though witnessed a marginal decline on sal3s volume front, the realisation was better. So the Q2FY14 numbers have been better than the estimates till date. 

It is true that the cut is GDP growth estimates of India by World Bank is a minor negative. In April 2013, the World Bank had projected India's GDP would grow at 6.1 % in the current financial year and at 6.7% in FY15. The World Bank today slashed India's economic growth forecast for the current financial year to 4.7 % for FY14. But we feel the Estimates are revised on regular basis and as the H2Fy14 pans out to be better, the estimates would be revised upwards. So we do not expect much of a negative impact of the news.

The SGX Nifty is trading at 6116 (Up 6 points). We expect Indian indices to witness a positive opening. But some profit booking may happen in later part of trading session.