Markets To Open The Week On A Good Note

The markets are dancing to the tune of a changing environment and the environment is changing almost on a daily basis. Market action over the past one month or so has been extremely volatile, primarily because factors that support its rise have ebbed considerably in degree of visibility while on the other hand those that threaten its sentiment have raised their heads yet again. So, you had the rupee moving up to levels which were clearly making it uncomfortable, while all other factors almost maintained a status quo. The usual threat of the US tapering its bond buying continued to come and go.

Point is, all these factors are only acting on the nerves of the market and not its fundamentals. There has been no change in the basic character of the market which can decisively take it in any particular direction at least over the past fortnight or so. However, the market will always seek to find direction in something or the other. This is more so from the short term point of view and there are many factors that can drive the markets as we commence a new week.

The biggest and the most important factor will be the state elections which kick in from today. Madhya Pradesh goes to vote early morning and the pattern that emerges out there could well set the tone for May 2014. Though the outcome is fairly certain, an unexpected change in it could lead to some jitters in the market too.

Another very significant development over the weekend has been the deal that Iran has struck with the US and five other countries. Accordingly, Iran will curtail its ambition towards becoming a nuclear state. The deal spells a huge change in the global geopolitical equations, particularly in the Middle East, Gulf and South Asia. As for India, it certainly has a huge positive. The expected softening of oil prices is one of the biggest advantages for India that follow the deal. This would obviously result in a lower outflow on account of imports of oil and consequently a diffused pressure on the Current Account Deficit. Reports suggest that the country could save as much as USD 8.5 billion through cheaper oil imports.

That should be enough for the markets to take off today. For all obvious reasons, the week is all set for a good start. This is already visible in the way other Asian markets have opened today. The Japanese Nikkei is up almost one percent and is being followed very closely by Taiwan and Korea. The Taiwan Weighted is up 1.10% while the Seoul Composite is up 1%. Singapore, Malaysia and Hong Kong are trading up an average quarter percent while Indonesia and China are the only two markets which are struggling to remain in the green.

The overall sentiment however remains positive to begin the week. As we go into it, a host of economic data from the US and the European region is expected to create that little flutter as it usually does. All said and done, the outlook for the week remains fairly positive riding on the Iranian development. Expect a gap up opening this morning and a good trading day looks to be in the offing.