A Good End To The Year In Sight

Central Bankers around the world have ensured that markets have a good Christmas and a fabulous end to 2013. So in conclusion, 2014 is all set to begin on a good note. To cut a long story short, the next round of the market’s leg up is about to begin. But of course the move will be largely cautious and rather slow at least until the May of 2014. All bets will now be placed on the assumption of power by a new government in May 2014. The noise about an alternative to the incumbent government is getting louder by the day.

The sitting government has suddenly turned hyperactive on all fronts. From addressing the economic slowdown to showcasing its sensitivity to India Inc’s problems, every effort is being made to project its pro-growth image. Policy decisions are being put on a fast track and bottlenecks to the development of key industries are being sought to be removed. This behavior is a given natural in any election year. But the need for it this time around is higher than it ever has been in the 67 odd years since we achieved freedom. But the critical differentiator in all this fight for power is the leadership. A strong, decisive and acceptable leadership is what will make the difference. Right now, the BJP holds the upper hand in this context.

While domestic focus is completely on the political factor and its fall out on the economy, the global economic scenario is suddenly changing for the better. The taper has turned out to be a non-event. Economic fundamentals of the US are consistently improving over the past two months. Even institutions like the IMF are now beginning to get positive on the US economy. It reportedly raised its growth forecast for the US economy expecting it to grow at a faster clip than it previously did. Markets there have already begun discounting this positivism. The Dow Jones Industrial Average and the S&P500 closed at record levels last week after reports showed that the US economy had grown at its fastest pace in the last two years during the last quarter. The European markets too have been riding on the back of good economic growth in the US for quite some time now.

Year end holidays are likely to keep market activity on a lower side this week. All the anxiety over central banking action is behind us at least for now. The RBIs next take on interest rates will come somewhere in the month of January. At least for now, the markets are at peace and can go into the year end and the welcome the New Year joyously. Another significant factor that will be closely monitored over the next week or so extending further into the arrival of 2014 will be the FII allocations for the next year. New year allocations are likely to be higher in favour of India as the Modi chant gets louder. A stable and decisive leadership is what all are looking for if India has to achieve its truest potential.

Meanwhile, the Asian markets are trading positive this morning. Except for China and Indonesia, all others are in the green. The Shanghai Composite is currently trading down 0.15%. Japan and Malaysia are on the brink but trading in the green while Singapore and Hong Kong are inching upwards. Taiwan and Korea are looking quite comfortable with benchmark indices trading up an average half a percent this morning.

Economic growth, development and project clearance noise is getting louder to better the investment climate in the country. This will help the markets gain strength from where they ended the previous week. Benchmark indices are likely to open higher and trade with a positive bias today. Market action is likely to be a bit dull with curtailed by a day for Christmas and mainly because of the holiday season abroad which will keep FII activity subdued. All in all, looks like the year will end on a good note and 2014 looks promising.