Markets Cheer Positive Global Cues

Taking some cues from their global peers, the Indian markets received some cheer. The Sensex and Nifty ended the week with gains of 2.48% and 3.01% respectively. The main factor that boosted the indices is Iran's nuclear deal with the US and five other countries to the effect that it will curtail its nuclear ambitions. The deal spells a huge change in the global geopolitical chessboard, particularly in the Middle East, Gulf and South Asia.

For India too, this deal certainly spells significant positives, the expected softening of oil prices being among the major ones. This would obviously result in a lower outflow for oil imports and consequently a reduced Current Account Deficit. Reports suggest that the country could save as much as USD 8.5 billion through cheaper oil imports.

On the global arena, the data points on the US jobs front are encouraging. Though they are slow, the signs of recovery are there. In addition, the US Fed has recently announced new concerns about the long-term US slowdown. Hence, it seems a distant possibility that the QE taper would start anywhere in the near term. The easing in the Japanese markets would also help to maintain liquidity in abundance in the global markets.

Back home, the Q2FY14 GDP for Q1FY14 came in at 4.8% as against 4.4%. This was a tad higher than the figure of 4.7%, which the markets were expecting. The markets had already priced in a sub-5% GDP, and thus this data gives no cause for jitters on the indices when they open on Monday.

However, the April-October 2013 fiscal deficit came in at 84.4% of the target set for FY14. This is likely to create some pressure for the INR, which is trading above the 62 per USD mark.

With regard to institutional activity, FIIs continued to pump in funds in Indian equities. In the last one week, they invested Rs 2394 crore. Even DIIs are seen buying equities now. On Thursday (November 28), they bought shares worth Rs 330 crore, ending a selling spree of 12 days at a stretch.

The markets are now eyeing the state election results, which are likely to indicate the direction of the outcome of the general elections of May 2014. In the next week, the US will be coming out with the jobs data, which will also be watched closely. So expect to see some more volatility, but with a positive bias.