Amid De-earth Of Major Data, Expect A Flat Opening For Indices

It was another volatile day for the Indian equity markets. The leading equity indices started the day on a negative note taking the cues from the other Asian markets. However led by the IT stocks and the TECk Index the markets witnessed an up-move in the first half an hour. In the middle hours profit booking resulted in some decline in the Sensex. However it recovered again as accumulation in the IT and FMCG stocks happened.It seems that the markets are completely driven by the news on the domestic as well as the global front. While on the domestic front it is the politics which has taken the centre stage on the global front the macroeconomic data is keenly watched for.

Let’s first take a look at the domestic factors. First and the foremost is the possibility of Government cutting the borrowing targets. As the Government has already hit the level of 94% borrowings limits, it is planning not to go ahead with auction. We feel it would provide a positive impact to the markets as more borrowing would have indirectly impacted the interest rates.

Secondly the government seems to be getting close to achieve its divestment targets. With the Balco and Hindustan Zinc divestment happening, the government would be able to raise Rs 20000 crore. Along With its policy of special dividends of around Rs 16000 Crore, the government is likely to achieve its target for divestment. However we feel this is not the right way to look at the things. The Government is arm twisting the PSU which are cash rich. Further putting money from one pocket to another would not help. However the sentiments in the markets have turned positive with this news.

Maharashtra Government reducing the power tariff by 20% is also making it to the headlines. It seems that the APP effect in Delhi is making its impact on the other states also. We feel it is negative news for the power companies, as if other states also take such populist measures, it will add to the burden of power companies which are already asking for higher tariffs. Further the subsidy burden will also increase, impacting the finances of Government which is already reeling under pressure.

On the global markets front the US markets were shut yesterday. As for the Asian markets, most Asian stocks rose as Japanese indexes reversed yesterday’s declines with the nation’s policy makers meeting to review monetary policy. The yen snapped a three-day gain as the dollar climbed versus most major peers while Chinese interest-rate swaps declined. The Bank of Japan starts a two-day policy meeting today.

Additionally, China’s central bank injected funds into the financial system yesterday and expanded access to a lending facility as rising demand for cash before the Lunar New Year drove the biggest jump in money-market rates in seven months. Investors had a wary eye on Chinese money markets after the People's Bank of China (PBOC) announced a surprise injection of funds on Monday aimed at curbing a recent spike in rates. The central bank also broke tradition by saying it would add more money at its regular operations on Tuesday, an apparent attempt to avoid a repeat of the severe cash crunch that roiled markets in June.

On the back of above factors most of the Asian markets are trading in positive zone. While the Nikkei is trading up by 1.41%, the Shanghai is trading in green with gains of around 1%. Even Hang Seng is trading in green with 0.62%gains. The SGX Nifty is trading in green with 0.28% gains.We expect a flat opening for the Indian markets today and then remain in a tight range there after at least in the early hours of trade. There are few important results today viz Colgate Palmolive, Asahi Songwon, Info Edge India, Kotak Mahindra Bank and Thermax.