A Nervous Day To Close The Week

The first week of the New Year has turned out to be very anxious for the markets. The instance of benchmark indices consistently sliding down at the beginning of the year is a rare one. Except for Wednesday, the markets have ended in the red for the entire part of the week that fell in the New Year. A market devoid of any meaningful triggers will close with the most awaited one, the December quarter results, which kick in today. software major, Infosys will be announcing its third quarter results today before market opening. It remains one of the most awaited events of the season and shall set the tone for the market’s behavior today. Another important data point that will help shape the market’s behavior is the trade data to be released in the later part of the day.

The market’s focus which has remained too much on the political scene will hence finally move to something else and more relevant. In fact, this had already begun happening with a host of economic data points released during the middle of the week on the global front.

Going back to the most important trigger for the markets as we move forward, that is, the December quarter results, there has been a fairly good build up of the thought that nothing much is likely to come out of them to push the markets higher. The fundamental factors that could have helped in improving India Inc’s performance haven’t really changed over the quarter. To mention some of them again, interest rates have remained high and overall economic activity hasn’t really shown any encouraging signs.

What can really help the markets in the short term going forward is the trade data that will be announced during in the pre-noon session. Just to put things in perspective, the trade deficit had narrowed down to USD 9.22 billion in the month of November riding on the back of higher exports and declining imports, especially of gold. With a slight uptick in the global economy that has been witnessed over the past couple of months, there is every probability that trade data will continue to be on the positive side.

Factors that are real market influencers are coming in bits and pieces. If the market’s have to witness an all round and sustainable rally, it is an imperative that we see an across the board improvement in macro factors, both domestic as well as global. From a higher industrial production to the coming down of inflation everything needs to fall in place for investors to expect a good and sustainable rally.

The global scene is already on the mend. At least it seems so. Economic data coming out of there, is showing some very encouraging signs. The markets have responded well to them too. Today’s jobs report shall further fuel expectations of a good and sustainable recovery in its economic health. That will remain the key to global market behavior going forward. The European Central Bank’s action of not hiking rates reflects on what can be expected from that region. The status quo which keeps interest rates at the lowest levels for the region, reflects on the Central Banker’s psyche which favours a more business friendly environment to spur growth.

Markets in Europe trended lower yesterday and closed flat to slightly negative in a fairly volatile session. Anxiety over the ECB’s actions and the US economic data that is gradually flowing in kept them in a volatile state. In the US all eyes are now set on the jobs data that will be released today. A jittery market ended yesterday on a mixed note. While the S&P 500 did well, the Dow faced some selling pressure and ended in the red.

Asia is trading mixed this morning following disappointing trade figures coming out of China. Chinese exports grew by 4.3% while imports were 8.3% higher in the month of December resulting in a higher than expected trade balance. The Shanghai Composite is trading half a percent down as of now and other major markets including Japan are more or less following suite. The Nikkei is down 0.35% followed by all other markets including Indonesia, Malaysia and Korea. Taiwan, Singapore and Hong Kong are the only three markets which are holding on to their gains so far.

Global cues suggest that the markets will open on a flat to negative note. The real trigger for the Indian markets today however remains the December quarter result of Infosys which will be declared before we go in to trade. With the upheaval that the company has gone through in the recent past including the churning of its top management, the market is likely to be very nervous ahead of its results. Infosys has been a company which has always under promised and over delivered. With N R Narayana Murthy at the helm of the company’s affairs, it could well be the old ways again. Expect growth to come in as promised or even higher but a cautious guidance. What this means is the markets could slide at beginning of the day to recover as they fathom out what the results mean and what can be expected from others to follow suite soon. Be cautious, don’t get over excited if you see some euphoria.