Global Cues Aren’t Good, Brace For A Pressured Open

Hope is eternal, and as far as the markets are concerned the degree of hope is even more accentuated. It is this accentuated degree of hope that ensures, the markets open a new page every week and every day. So, while a host of economic data points released last week were the driving factors for the markets, there will be new to come and other factors that will do so this week.

The week begins with the ongoing corporate season as the main trigger. Many frontline companies from various sectors will be announcing their results this week. As stated on many occasions, corporate results for the December quarter are a foregone conclusion.

Fundamentally there has been no major shift in the factors governing corporate performance during the December quarter and hence there is nothing much to expect from them. Those that have announced their results so far have amply proven this. From Infosys to TCS and from ITC to HBDC Bank, the numbers have been quite in line and in some cases even lesser than what they were expected to be.

One basic principle that remains as the main governing factor as we enter a new trading week is that, trading will be more stock specific as companies announce their December quarter performance. There is anyways no major macro data point that is slated to come in at least for this week. As we progress into the future, the RBIs policy meet slated for the end of the month will gain currency and begin to shape up market expectations. Speculation on whether the RBI will cut rates will be high this time following the leverage that a lower inflation has provided the regulator. Consensus is however emerging on a status quo rather than a reduction in rates.

The government on the other hand is trying to salvage whatever of its pride it can by putting the economy back on the growth path. The clearance of PPP projects worth Rs 7595 crore is just an example of the push that it is now beginning to look like a shove. According to reports, the Finance Ministry has ordered a cut into spending of other ministries in a bid to bring down the fiscal deficit down to budgeted levels. All these look like a rather desperate last minute attempt at putting things in order. Macro measures do not shape into results quickly and this reality will keep markets guessing on the eventual benefit of anything that the government is out to do now.

While all that will gradually unfold, here is what you need to look at for today. On the Global front, the December quarter results have been ruling the roost. The US markets took a slight dip towards the end of the week following some weak results out there. In Europe, things looked bright, thanks to encouraging macro data points such as retail sales figures.

Asia is trading based on Chinese data points being announced this morning. A slower than expected growth in GDP on a QoQ basis (1.8% against 2% expected) has overshadowed a 7.7% YoY rise (against 7.6% expected). Industrial Production too has come in at a lower level 9.7% on a YoY basis against an expectation of 9.8%. Fixed Asset Investment too came in below expectations, growing 19.6% on a YoY basis.

The result of this is visible on the way Asian markets are trading this morning. Red seems to be the colour of choice. Except for Taiwan and Korea every single market is trading negative. The Taiwan Weighted is up a quarter percent while the Seoul Composite is trading on the brinks. All other markets including China, Hong Kong, Indonesia, Malaysia, Japan and Singapore are down and cracking further.

Global cues aren’t looking favourable this morning and the Indian markets are likely to follow suit. The SGX Nifty too is currently trading down 20 points. All this suggests a very pressured open for the markets today. But as pointed earlier, the action will be highly centralized around corporate results making it a very stock specific bet to take. Caution, you may hit a roadblock if you are the too adventurous types.