With Lack Of Triggers – Expect A Flat Opening For Indian Markets

Yesterday the Indian markets opened gap down as expected and ended lower for the fourth straight session. The reasons were quite clear amid weak Asian cues, sharp contraction in December services PMI dashed hopes of a recovery in the second half of the year. Sensex ended down 57 points at 20,795 and Nifty ended down 20 points at 6,192.

On the data part, The Purchasing Managers' Index (PMI) for services went down sharply to 46.7 points in December from 47.2 points in November. A PMI reading above 50 signals expansion in the sector and below 50 shows contraction. Services PMI has now stayed below the 50 mark for the sixth straight month. The PMI services in the third quarter of 2013-14 stood at 47 points compared to 46.7 points in the previous quarter. The government and policy makers had pinned their hopes of a recovery in the Indian economy in the second half of the year.

While the Indian markets closed on a weaker note, the U.S. stocks fell for a third day, putting the Standard & Poor’s 500 Index on track for the longest stretch of declines to start a year since 2005, after slower-than-forecast growth in service industries. While the S&P 500 closed in red with marginal losses of 0.25%, the Dow closed in red with decline of 0.27 %. The European markets remained flat.

Taking the cue from the US markets, even the Asian markets are trading on a flat note with negative bias. The indices swung between gains and losses as a report showed U.S. service industries expanded less than expected. As the Yen fell, Nikkei is trading in red with a marginal decline of 0.24%. However other indices are trading in green, though with insignificant gains. Hang Seng is up 0.25% and Taiwan is up by 0.52%. However the Shanghai Composite is down 0.59%. So the global signals are mixed and are not providing any particular direction.

In between there are few factors to look for on domestic front. First news is, government officials are in discussions to cut a record high import duty on gold and relax rules on exports after the measures helped narrow the country's trade deficit and now threaten to encourage smuggling. If this happens, the stocks like Titan and TBZ would be the major beneficiaries.

Another report by Gartner suggested that, Global IT spending is expected to pick up pace this year and grow 3.1 percent to touch USD 3.77 trillion on the back of higher enterprise software and device sales. In 2013, the market grew 0.4 percent over 2012. The total spending in 2013 is estimated at about USD 3.66 trillion. Enterprise software spending growth is expected to be the strongest at 6.8 percent to touch USD 320 billion by 2014-end from USD 300 billion last year. This is positive news for the Indian IT exporters.

As regards the expected opening of the Indian equity indices, with mixed global cues and hardly any trigger on the domestic front, we expect the Indices to open on a flat note. However it May witness some positive move as the trading session progresses.