Volatility will be the standard plank as we head towards F&O expiry and await the GDP data to be released towards the end of the week. Working in anticipation has been the style of the markets for quite some time now. There is no conclusive factor which can provide any substantial direction to it as of now. It would be good to ride the ups and down rather cautiously, than rushing forward with any big bets. You could see a flat open with a slightly positive bias for the markets today. Take each day as it comes. Have a happy trading week ahead!
After the end of a rather clumsy week, we head toward another equally baffling one, where market action will continue to seek direction more from global cues at least for the initial part of it. As we progress further, F&O expiry and GDP data will become the focal points. The former is more or less a function of the latter. At the end of the day the focus will remain on what kind of growth comes in and can be expected going further in the economy. In fact, economic growth has been the main factor driving markets for quite some time now.
A very interesting aspect of this is the various discussions and estimates that are coming forward with respect to economic growth, especially in the Indian context. While some believe growth has bottomed out and will only pick up from here on, there is a school of thought, which feels there is at least some more downside or may be a flat line growth in store for us. On an average the various estimates put together suggest a growth of somewhere around 4.8 – 5% for the Indian economy this financial year.
The debate on estimates can go on forever. While it does shape the longer term curve of the market, at the shorter end more specific factors play a role in deciding which way it is headed. These specific factors are right now coming in a measured manner and more from the global side than on domestically. Take for instance the very obvious news about Facebook’s acquisition of messenger service Whatsapp. There is a lot being written about the valuation and logic of this acquisition. But the most important factor that emanates from it is that, it has managed to put back into focus, technology stocks, especially startups with (or without) a sound business model.
Prima facie, what could have driven the founders of the social networking behemoth towards this acquisition is not very clear. The only factor that goes in favour of it, is the vast user base that is hooked on to it. Irrespective of geographical locations, the service connects millions throughout the world and that is what has prompted such humungous valuations. Right now, even as a layman could understand, there is no revenue model which the messaging service seems to have in place. Yet there is this huge sum paid for its acquisition.
In the Indian context, there can be a parallel application of this logic to only one set of companies (at least as of now) – telecom. The subscriber base of leading telecom companies is the only comparable parameter if you were to apply the valuation logic in the Indian context. Yet, there is no way that one will come to value Indian companies the way Facebook has valued Whatsapp.
For a true unlocking of the value hidden in Indian companies there is a need to come up with such strong compelling valuations. The problem with the Indian side of it lies not in the fundamentals or the lack of parameters. It is solely the way Indian companies are perceived because of certain factors, sometimes extraneous to the business model.
The worst of this problem factors is the ease of doing business in India. A massive red tape, political involvement in the business ecosystem and the fabric of corruption, which getting rugged by the day are factors that are probably acting against proper valuations of Indian businesses. The need to overcome these problems is absolutely acute as of now. The time too seems to be right to act. Whether we do or not will be known in just a little more than a couple of months.
Coming to where the markets are headed this week, as mentioned earlier, global cues remain the focal point in absence of any immediate short term domestic triggers. The US markets are presently riding on economic data points that have been coming out. Most of the negative or weaker ones have been shrugged aside with 50% of the blame falling on the bad weather.
In the Asian context the week has begun on a mixed note. Japan, Singapore and Indonesia are currently trading in the green with benchmark indices moving up an average quarter percent. Hong Kong and China are the two markets which are witnessing a good amount of selling pressure as of now. The Shanghai Composite is down 1.75% as of now, while the Hang Seng is down 0.89%. Korea and Taiwan are trading an average 0.30% below their preceding close.
Volatility will be the standard plank as we head towards F&O expiry and await the GDP data to be released towards the end of the week. Working in anticipation has been the style of the markets for quite some time now. There is no conclusive factor which can provide any substantial direction to it as of now. It would be good to ride the ups and down rather cautiously, than rushing forward with any big bets. You could see a flat open with a slightly positive bias for the markets today. Take each day as it comes. Have a happy trading week ahead!
