A Nice Weekend In Sight

The market is literally becoming dependent on foreign actions than domestic factors. for the whole of the last trading week the markets sought direction based on global cues with only a couple of data points on the domestic front helping it. The Fed minutes released a couple of days ago have put brakes on the upward rise of the markets, which gave in a good amount of their gains yesterday. After a consistent rise for four days some amount of profit booking is a given thing. But the reason for the market to go downhill was more to do with the Fed minutes which stirred the psychological debate on taper yet again.

You would have read it here before. Just to put things in perspective, the markets are expected to remain volatile and seek direction based on information thrown at it in bits and pieces at least for the next three months. There seems to be no hopes of a decisive run at least on the up side until you we see some clarity on the political front. That is a clear four months away from now. As mentioned in earlier discourses, investors have to learn to live with the volatility and uncertainty at least for now.

One reported development which can really change the mood of the market as we close the week today is China’s willingness to fund at least 30% of India’s infrastructure plan. This I am sure will surprise many. Given the geopolitical equation between the two countries, this suggested move by China looks very surprising. Political wisdom should prevail in favour of development of the nation. Suggestions of a similar nature that came up earlier have been brushed aside by the government citing security reasons.

Given the present economic as well as political circumstances, not just in India but globally, there is a need to realign our foreign policy. The need of the hour is to address development and hence economic growth. There cannot be any bigger opportunity to safeguard the country’s finances and strengthen its Balance Sheet than to invite funding in the nature of FDI from a rich and willing neighbor. A trillion dollars in five years to fund the most critical element of economic growth is not something that is on offer for anyone and everyone.

The government needs to look at it dispassionately only from a business point of view and grab the opportunity to fund its growth. The coming together of the two fastest growing economies will also bring with it political advantages. Rather than bending to the designs of west-inspired funding agencies, we would be far better assessing the Chinese proposition and acting in time. Right now, it seems like a god sent for an economy fighting to regain its fast growth path. To act or not to act is entirely dependent on how pragmatic a thinking our current policymakers have.

A big bang acquisition (social media giant Facebook acquiring messaging company Whatsapp for USD 19 billion) lifted sentiments to an extent where US markets preferred to ignore a mixed bag of economic indicators. The Dow ended the day more than half a percent while the S&P 500 was up 0.70% at close. Earlier in the day, European stocks closed almost flat worrying a bit about China’s lower than expected data points on manufacturing as well as their own business activity.

But the overnight US market action coupled with upbeat comments from the Japanese central banker have ensured that Asia has a good close to the week. Except for the Shanghai Composite in China, all other Asian markets are currently trading well in the green. Japan is leading all the way with the Nikkie currently trading up almost 2 per cent. Korea, Taiwan, Singapore, Malaysia, Indonesia and Hong Kong are all up an average half a percent in early morning trades. The SGX Nifty is trading up a marginal 2 points as of now.

Overall global cues are looking absolutely in favour of a good close to the week. Moving away from where it ended yesterday, the Indian market is poised for a bounce back based on global cues and open in the green this morning. The overall sentiment will in all probability remain positively biased as we move forward into the day.  In a market that is gradually moving towards the next big leap, keeping an eye on mid and small cap counters should be a part of the daily market practice for investors. After all these are the areas that bring in bigger gains in the market once it finds a decisive direction on the upper side.