A Flat Opening And A Volatile Trading Day

You can call it ‘consolidation’ or ‘profit booking at higher levels’ or for that matter ‘a brief pause’, but there is one term which aptly can describe market action over the past two days – reality. No matter how much of ebullience investors may have exhibited over the past week, they surely seem to have realised the pitfalls of getting overly excited in a market like this. There is no way that markets can sustain its upward momentum, unless a clear all round picture of a turnaround in the economic fortunes emerges. This can happen only if and when the bottlenecks to growth are cleared.

One of the biggest problems that the economy in general and as a consequence the markets have faced is that of government inaction or as they fashionably call it, is ‘a policy paralysis’. This critical problem seemed to have come to an end with the government clearing a whole lot of stalled (big) projects over the past couple of months. Well, clearing a project is one thing and getting it off the ground, just another. There are many underlying factors, which are even now, not conclusively in favour of these projects getting off the ground, higher interest rates being one of them and rather the most important one.

Governance and decision making at the highest levels have been our worst problems. Recommendations are made by committees to ensure that there is a good atmosphere to do business. However, these get conveniently scrapped by the decision makers. The latest on this is the Telecom Commissions’ decision to recommend a higher base price for the auction of spectrum. After failed attempts to do this following the higher prices that were set earlier, one would have expected decision makers to go with the recommendation of the TRAI. But by setting a higher price, it has probably ensured that the auction does not go through as smoothly as it should be going.

On the other hand there is this Jet-Etihad deal which is just being dragged. If there are issues, one would expect the various agencies involved to sort them out and get the deal going. That is the only way to ensure confidence among businesses, whether domestic or foreign, that India is the destination of the future. We could go on and on what plagues the Indian economy and in turn the markets. But this is probably not the forum for it. For now lets focus on what the markets look like today.

European markets closed pretty much in the green, recovering from losses incurred the previous day. The next set of triggers for markets in the European region will be the ECBs rate decision expected today. US markets closed in the positive riding largely on the back of a good move in European stocks earlier in the day. The Dow headed for a new closing high and the S&P 500 was up almost half a per cent.

Asian markets aren’t looking good today. The brighter spots are Singapore, Korea and Indonesia which are trading in the green.  All others are trading weak. The Japanese Nikkei is down 0.35%, while the Shanghai Composite is down 0.45%. The KLSE Composite and the Taiwan Weighted is trading on the brinks and could go either ways as we progress into the day. The SGX Nifty is trading marginally down at present.

On the Indian front, the tussle between bulls and bears will only get stronger from here on. After two consecutive down days, the markets could look for some upside today. With very little on the domestic front to look forward to, global cues will drive markets as the day progresses. You could see a flattish open and of course volatility is a sure given in the present circumstances and so is here to stay. Deep diving is strictly prohibited.