The HSBC Markit Manufacturing PMI data for India will be released in an hours time from the opening bell today. That should be the first of the macro indicator to guide the markets this year. The result season is about to begin and will provide the real kicker going forward. Indications are, you could see a mildly positive open and a range bound trading session today. Wait a couple of more days for the traders to get back to their desk before you see some real market action.
Though the first day of the year saw markets close in the negative it would not really be read as anything of consequence. A complete lack of triggers; domestic or international with almost all global markets shut on New Year’s Eve, volumes were expected to remain thin. A decline on thin volumes does not call for much of introspection. The holiday season is over and its time to get back to serious business. The markets will begin 2014 in real earnest today.
There are innumerable commentaries and expert opinions on how 2014 could shape up. One firm belief that runs through almost all in common is the fact that we are in a year which will be dominated by politics rather than economics. The populist compulsions of an election year will dominate a large part of the first half of 2014 while the result will actually shape the destiny of the country, the economy and hence the markets over the second half. The bet is on the coming to power of a more stable government at the centre with a dynamic and decisive leadership at the helm.
The first and primary reason why you need a good and stable government with a visionary leadership is to have policy makers who can come to the desk with more practical and economically rational ideas of governance. According to an internal note from the ministry of finance the fiscal deficit for 2014-15 will drop to just 1% of the GDP. Now that should be a really good improvement over what we currently are witnessing. Right now, the deficit stands at 4.8% of the GDP.
The calculations seem to be pretty simple. Earn more through disinvestment of stakes in government owned companies and improve tax collections to boost income. According to the note, the government has set a target of Rs 100,000 crore to be earned through disinvestments in 2014-15 and is also looking at drastically bringing down the subsidy burden that it presently carries on its head.
According to reports, there are also talks of more efforts being put in the coming months on the liberalization of the FDI policy. The Commerce & Industry Minister, Anand Sharma has reportedly been heard saying this. Sounds good, but one has to remember, there is no point in aiming high unless ground reality supports you.
Its good to be resolving to set your finances straight in the New Year but it is absolutely unacceptable to have waited so long to do something that could have been pushed for earlier. Had the government moved on the subsidy cutting front in the earlier years, the deficits would certainly not have burgeoned to levels where they stand today. There was also a clear case for reforms to be taken forward in a much faster manner than wait for the last mile catch up that the incumbent government is looking at doing now. The hope of a new government coming to power, which can really push through such daring resolutions is what will keep markets alive and kicking over the next few months.
As for today, markets are gradually getting back to business and the Asian trend is suggesting a rather mixed mood. Except for China and Korea all others that have opened are trading in the green. The Shanghai Composite is currently trading down 0.35% from its previous close while the Seoul Composite is marginally down. Taiwan, Singapore, Malaysia and Hong Kong are up in morning trades. The Taiwan Weighted and the KLSE Compsite are trading just on the borderlines, while the Hang Seng is up 0.14%. The Straits Times is picking up strength and is currently trading 0.39% up from its previous close.
The HSBC Markit Manufacturing PMI data for India will be released in an hours time from the opening bell today. That should be the first of the macro indicator to guide the markets this year. The result season is about to begin and that will provide the real kicker for the markets going forward. The SGX Nifty is trading in the green, though only marginally. Indications are, you could see a mildly positive open and a range bound trading session today. Wait a couple of more days for the traders to get back to their desk before you see some real market action.
