Global cues, especially from the Asian region are suggesting a strong open for the markets. However, do remember that the Indian markets have their own set of triggers to kick off trade this morning. Oncoming results from the big boys of corporate India will remain the focal point while the market will certainly await the actual inflation numbers instead of blindly acting on expected figures. If all is well there (on the inflation front) and there are no nasty surprises on the corporate earnings front you could see the markets trade firmly. For now it looks like there could be a cautiously positive start to the week with a strong positive trading bias.
Welcome to a brand new week. After a weak and volatile start to the year, the first seven days of trading were quite mixed. Towards the end of last week economic data points and fundamentals once again found themselves on centre stage. The market was once again focusing more on them rather than the political drama that has been unfolding since the fag end of last year. The AAPs, the BJPs, the secularists and the fundamentalists of the world will now be forgotten for some time as corporate India presents to the market, what it has been up to during the December quarter.
Infosys as usual kicked off the results season on Friday, announcing a performance which was more or less in line with what was expected by the markets. A limited impact was seen on the psyche of the market which on the one hand was dealing with its guidance and on the other hand also trying to search for the proverbial silver lining in the trade data. But a declining industrial production which actually fell 2.1% in November against a growth of 0.7% that was expected by economists along with slowing export growth which were up just 3.5% in December down from almost a 10% growth recorded between July to October will remain a big worry and sentiment spoiler.
We start off the week with another very important data set to be released between today and tomorrow. In fact this remains the most important pieces of data as far as macro economics is concerned in the Indian context. Inflation data for the month of December will be released today (consumer) and tomorrow (wholesale). Both these are expected to come down considerably, thanks to lower vegetable prices. According to reported Reuter’s poll, consumer inflation is likely to come down to 9.92% in December from 11.24% during the preceding month. Similarly, wholesale price inflation is also expected to come down to 7% from 7.52% recorded in the preceding month.
The most important quarter to watch amid slowing inflation data will be Dr Rajan and his men at the RBI. With inflation continuously remaining above the RBIs comfort levels, it has been almost impossible for the RBI to frame a monetary policy which suits the present economic growth scenario. If inflation really does come down and looks like headed southward even in future, the RBI could probably use the situation to its advantage and bring down interest rates.
Lower interest rates will not only spur economic growth through improvement of company fundamentals which have been weakening considerably because of a pressure on the interest cost front, but will also spur growth as finances become cheaper for carrying forward stall projects and planning for future ones.
It is a unique situation. In order to get over supply side bottlenecks it is essential that not only production picks up but also new capacities come up. That is the only way inflation can come down. On the other hand we have been waiting for inflation to come down and hence interest rates to be driven down in order to spur production and overall economic growth. No matter how many theoretical discussions are held around this, unless you witness a practical turnaround in the situation, expecting growth and hence a secular bull run in the markets would be futile. Things would certainly become clearer over the next few days.
As stated earlier, the focus for now will remain on macro data points and corporate earnings not just in India but also abroad. Europe has been looking as much at its corporate report cards as it has been looking at data points emerging from the US. Stocks there have edged higher towards the end of the previous week and are expected to trade with a positive bias this week too. In the US, the jobs data released on Friday were weaker than expected. However, markets pulled back to end the week on a positive note. Benchmark indices recorded their first positive close of the year on Friday.
Asian markets are trading strong this morning. The Japanese markets are closed celebrating the ‘Coming of Age’ Adults Day, but all others are trading green. The Chinese Shanghai Composite is up almost half a percent while the Hang Seng in Hong Kong is up 0.30%. Indonesia and Malaysia are doing quite well this morning. The Jakarta Composite is up almost a percent while the KLSE Composite is trading up half a percent. Korea, Taiwan and Singapore are well in the green with the Seoul Composite up 0.67% and the Taiwan Weighted trading up 0.77%. The Singaporean Straits Times is up a quarter percent as of now and the SGX Nifty is trading firmly up (32 points).
Global cues, especially from the Asian region are suggesting a strong open for the markets. However, do remember that the Indian markets have their own set of triggers to kick off trade this morning. Oncoming results from the big boys of corporate India will remain the focal point while the market will certainly await the actual inflation numbers instead of blindly acting on expected figures. If all is well there (on the inflation front) and there are no nasty surprises on the corporate earnings front you could see the markets trade firmly. For now it looks like there could be a cautiously positive start to the week with a strong positive trading bias.
