Expect a flat to negative open for the markets today. There are mixed expectations of what GDP growth for the second quarter could come at. We are just past the F&O expiry for the month of November and fresh position building will probably wait until economic data comes out today. It could well turn out a day with a negative trading bias. Don’t be over enthusiastic on what is being said. Rather, wait for it come out in black and white. Stay cautious and have a great weekend.
Outspoken optimism has become a fashion of sorts. And that is helping the markets a lot. Analysis of the market’s performance over the past couple of months bears testimony to the fact that almost all of the major moves that have happened in frontline markets and benchmark indices have reacted to the noise around them more than the reality. At times you have the European region cheering the perceived improvement of their economic situation while at other times you have the US crying wolf on tapering.
On the domestic front the focus has now shifted to speculative talk about the outcome of the state level elections. This is being further fanned by large global institutions which have been openly supporting the coming to power of an alternate government headed by the BJP. The Goldman’s and the Nomura’s have been focusing too deep on the Indian political theatre and commenting freely on it (of course only to later refute what they say) creating that occasional flutter in the market.
But, the most vivid expressions have come from policymakers and institutions about the expected growth of the Indian economy. Today is when the second quarter GDP numbers will be announced. The markets will naturally be fully focused on this very important economic data point for future direction. it is bound to keep the markets on their toes today. There have been various projections about what this number could be. After clocking in 4.4% growth in the preceding quarter, the most reasonable expectation is that we could see something around 4.6% this quarter.
Assocham is expecting that the Indian economy will grow at 5.4% in the second quarter. Improved agricultural output following a good monsoon, is what it feels would have propelled growth in that sector and hence the overall economic growth of the country. According to a study conducted by the association, agricultural sector is likely to grow at 4.25% whereas industry and services are expected to register a 3% and 7% growth respectively. Now you know what we mean by outspoken optimism.
Though monsoon has been pretty good, it has also assumed dangerous proportions at times destroying crop in many places. There is every possibility that the negative impact of a heavy monsoon could undo the good work of the farming community, thereby keeping growth under a check. Reports like these have an anesthetic impact on the markets. The markets react to these (sometimes even disproportionately) and that is dangerous from the investor’s point of view. This is why we have been advocating caution for quite some time now. Before getting into what market action could be like today, here is a heads up on what happened overnight.
European markets ended higher yesterday riding on some encouraging economic data. Confidence among industrial firms was up for the seventh straight month in November. On the consumer front this remained slightly on the lower side. According to reports, economic sentiment, which measures the mood across both consumers and businesses, rose to 98.5 in November, the highest level since August 2011 and up from 97.7 in October. In the US too, stocks moved up higher and the S&P 500 and the Dow Jones Industrial Average scaled record high closures ahead of an extended weekend which begins with Thanksgiving today.
Closer to home, Asian markets are trading mixed this morning. It looks to be a highly volatile day out here. Japan is trading on the borders with the Nikkei just about 4 points down from yesterday’s close. But China is trading in the green with the Shanghai Composite trading almost a percent up from where it closed yesterday. Taiwan, Korea and Hong Kong are doing well with the Taiwan Weighted presently trading almost half a percent. The Seoul Composite is trading up by 0.10% while the Hang Seng is up by 0.34%. Singapore, Malaysia and Indonesia are the only three markets which are flirting in the red zone this morning.
As for the Indian market, expect a flat to negative open for it. There are mixed expectations of what GDP growth for the second quarter could come at. We are just past the F&O expiry for the month of November and fresh position building will probably wait until economic data comes out today. It could well turn out a day with a negative trading bias. Don’t be over enthusiastic about what is said, rather, wait for it come out in black and white. Stay cautious and have a great weekend.
