Markets Awaiting Economic Data: Expect A Weak Open And Volatile Trades

It opened with a bang so loud that 24000 points on the Sensex looked to be coming within days. But sanity seems to have been restored in the markets, which have since then seen a pretty good correction on the lower side. Well that was anyways expected. Too much of optimism is never good for the markets. This is particularly true in a situation where there is no real change in the fundamentals of the economy. Riding on a feel good factor, based on some expected outcome of the future does not really bode well for the markets; especially so when global factors are jittery.

There is a sense of déjà vu, with the tapering noise getting louder once again, prompted by better than expected economic data, particularly on the employment front in the US. This has seen some amount of moderation in the optimism. In a way that is a good thing to happen to the markets in the current circumstances.

Going forward, the markets will behave the way they are currently doing for quite some time. There are two factors that will drive the markets over the near future. Both of these are the central bank action of the US and here at home. While the FOMC meets on the 17^th of this month the RBI is scheduled to meet on the next day (18^th of December). So the ensuing Wednesday is a day of reckoning for the markets.

The time between, will be spent speculating on what the two central bankers will come up with. That means a whole lot of volatility for investors to deal with. The only reasonable approach hence is to be cautious.

Meanwhile the budget deal struck in the US reinforced fears of the commencement of tapering pulling down stocks not just in the US but also in the European region. In what is been seen as the worst performance in more than a month US stocks dealt with a changed sentiment due to the budget deal struck in Washington, which has brought the Federal Reserve very close to tapering its stimulus measures.

Asian markets are trending weak this morning taking cues from their western counterparts. All without any exception are in the red with the Japanese Nikkei moving a good one and a half percent below its previous close followed by the Jakarta Composite of Indonesia which is down 1.20 per cent. Taiwan, Korea and Singapore are down half a percent each, while Malaysia is just behind them with a loss of 0.37% as of now. Hong Kong remains among the major losers with the Hang Seng trading down 0.76% and the Chinese Shanghai Composite is the only index which is showing some signs of turning positive as the day progresses.

Indian markets are likely to follow their global peers and open weak this morning. Industrial production data as well as the consumer price index along with the manufacturing output is due to be released today. That could keep the markets volatile until finish. With no other triggers for the markets at least for now, you could see a rather insipid trading day as a follow up to what has been happening over the past couple of days.