Asian Indices Trading In Red- Expect A Gap Down Opening For India

Indian equity markets remained volatile in the preceding week. The markets ended nearly 2% lower in the week to January 3 amid concerns over sluggish growth and rising fiscal deficit. In the week to January 3, Sensex declined 1.6 per cent (342 points) at 20,851 while Nifty ended down 1.6 % (around 103 points) at 6,211.

The major data that was announced in the past week was Core eight infrastructure industries registered a muted growth at just 1.7 % in November 2013 as compared to 5.8 % in November 2012. In October 2013, production of these core industries contracted 0.6 %. Another worry was the fiscal deficit for the first eight months (April-November) stood at Rs 5.1 lakh crore or nearly 94 % of the Budget estimates for 2013-14 clearly showing fiscal strain in the economy.

As regards the factors that would drive the markets in next week, the first and the foremost is the start of announcement of December 2013 quarter corporate results. While the major one is expected of Infosys which is expected on January 10^th 2013. With Infosys already witnessing pressure on the management front, it would be interesting to see how the company performs.

Apart from that the IIP numbers would be announced for the month of October 2013. The IIP figures have been quite disappointing since the past few months. And we expect the trend to continue this time also. The performance of India’s services sector will be released by Markit Economics today. Another factor to watch out for would be the FII investment pattern. As far as last week is concerned the FIIs were net buyers.

As for the global markets, the US markets on Friday remained range bound and closed on a flat note. While Dow closed up by 0.17%, the NASDAQ and S&P Closed in red with miniscule losses. One of the leading news agencies reported that Wall Street opened higher but subsequently pared gains after Philadelphia Fed President Charles Plosser said the Fed faced "immense" challenges now that it had reduced bond buying, and that it needed to be cognizant of a potential rapid rise in future inflation

Asian markets have started on a negative note with profit booking taking place in most of the markets. Nikkei is the biggest loser with the index declining by 2.38%. Shanghai is down more than 1% and even Hang Seng is down 0.88%.

Regarding the clue for Indian markets, the SGX Nifty is trading in red with 0.60% decline. With Asian peers witnessing pressure, Indian markets are unlikely to be any exception. Hence we expect the Indian equity indices to open gap down. However we may see some revival as the European markets open and few important macro data points are announced. Hence rather than jumping all guns, one should follow a wait and watch approach in today’s trade.