On the domestic front, the WPI data to be released today is the only data point that the markets could have looked at. But there are reasons for it to ignore that piece of data and the more important drivers of the markets this morning will be global cues, which are certainly not looking good at all. The week seems to be headed for a disappointed close following the global noise. Markets are expected to open on the down side and trade with a negative bias throughout the day. The SGX Nifty is down 45 points as of now, suggesting the overall mood of the investors and their view point on the Indian markets for this morning.
The last 20 minutes of trading yesterday were very interesting. After having hovered in the green zone for most of the time through the day, the markets came crashing down to close in the negative. Once again global cues are at play. Two of the most critical components of the BRIC have put global markets in a state of flux.
China is beginning to be a far bigger worry than what was originally thought of. The economic outlook on the country is changing by the day for the worse. Its Premiere, Li Keqiang has been reported to have warned about the “severe challenges” that the economy faces in 2014. All this has led to heavy speculation about its central bank going easy on the monetary policy to stimulate growth. Long term and sustainable growth is more important which makes slower economic expansion this year more acceptable for the government there.
Key economic parameters in the worlds second largest economy are witnessing a marked slowdown. Slower growth in investments, retail sales and factory output, are just the beginning of the overall problem. This problem has the potential to derail the entire global growth outlook. The psychological impact of it is already beginning to show up in the way global markets have reacted to it.
To complicate matters further, Russia’s tryst with Ukraine is raising its head once again after having lied low for the initial part of the week. To assume that all was well in that part of the world after Russian troops pulled out from Crimea was anyways very premature. Modern day geopolitical flare ups do not settle down so easily. The Ukraine episode is a classic chance for Russia to ensure the resurgence of its geopolitical supremacy. Putin would certainly not let it slip off so easily.
The net result of the above disturbing factors is a sharp fall in the index of optimism which was quite high as we entered the markets towards the beginning of the week. In overnight developments, the US markets witnessed the worst day in five weeks. In fact, the pressure of the negative sentiment was so high that it actually led to the markets shrugging aside some positive economic data points like lower unemployment that emerged on the US shores. The S&P 500 closed below key levels yesterday turning negative on a year-to-date basis. The Dow too was under the hammer and decline almost by a percent and a half as the day drew to a close. Earlier, European markets too were dragged lower for yet another day.
There is too much on the plates of the markets to digest. The Chinese slowdown and credit crunch combined with the Ukrainian crisis are just two major issues that are currently keeping the bulls off the track and resulting in bears having a field day. There seems to be blood all over the streets this morning. Japan is down a massive two-and-a-half percent followed by Hong Kong and Indonesia where the Hang Seng and the Jakarta Composite are down 0.90% and 0.71% respectively. Malaysia, Singapore, Korea and Taiwan are witnessing some acute selling pressure too. Benchmarks there are down almost half a percent as of now.
On the domestic front, the WPI data to be released today is the only data point that the markets could have looked at. But there are two reasons for it to ignore that piece of data. One, the RBI is completely focused on the CPI for any of its decision making with inflation as the reference point. Of course, the wholesale prices are eventual determinants of retail prices and hence paying attention to them is equally critical. But the more important drivers of the markets this morning are the global cues, which are certainly not looking good at all.
The week seems to be headed for a disappointed close following the global noise. Carrying the overnight selling pressure on its head, markets are expected to open on the down side and trade with a negative bias throughout the day. The SGX Nifty is down 45 points as of now. That suggests the overall mood of the investors and their view point on the Indian markets for this morning.
