International developments especially in the light of the Crimean referendum sets the context for the opening of a holiday curtailed week in India. Markets look all set to open with a positive bias and trade that way throughout the day. There is a limited amount of data flow this week to which the markets will be looking at in the domestic setting. A range bound week for the benchmarks is in the offing. Of course a closer watch on the international scene is needed as that could set the tone for the immediate future.
Welcome back after an extended weekend. With benchmark indices hitting their life time highs, the need to cool off and gather what’s really happening would surely be high on the minds of a majority of investors. The festival of colours was a perfect a fun filled way to kick off the week and take that time off to digest what was happening in the markets.
A lot of market action over the past couple of weeks has been dependent on global cues than domestic factors. In fact on the domestic front, things have gone the way as were expected. Inflation has cooled off, the Rupee is trading in a fair range and trade balance has been favourable to the government Balance Sheet.
A lot of holes can be pointed out in these data sets. But for the time being, those will have to be given a pass considering that the euphoria and optimism set in by the discounting of the future will not let investors to listen to that word of caution. While inflationary pressures are just about ebbing, there is every possibility that they would raise their heads very soon. Destruction of crop following the unseasonal rains and hailstorms is what needs to be closely watched. The lag effect of this climatic circus will be felt sooner or later, resulting in macro-economic calculations going awry.
There is just one consolation to this fear. Dr Rajan has been a very astute monetary policy setter. His acumen in reading ahead of time any indications which are likely to have a longer term impact on the economy and hence the markets can be fully trusted given the experience we have had so far. This provides comfort that the monetary policy meet to be held very soon will take care of any uncertainty that may arise out of this unforeseen natural shakeouts.
On the global front, Ukraine has been snubbed aside by the markets. Crimean’s have decisively voted in favour of accession to Russia. 96.77% of them have supported breaking off from Ukraine and joining the Russian Federation. Something that is really interesting in this case is the way the US administration has gone about the whole episode. In fact, their own markets actually laughed at the so called individual sanctions that were imposed by the White House.
A lot more attention has actually been paid to the data points announced yesterday. Industrial production in the US is rising. It was up 0.6% in February way ahead of the expected 0.1% rise. Also, figures for the month of January were restated and the actually decline came in at 0.2% against the earlier stated 0.3%. The Dow managed a 1.13% rise, while the S&P 500 was up 0.96% on close.
Europe which mimics the US in almost everything that it does has also imposed some individual sanctions following the Crimean referendum. But markets there too have been quick in responding and expressing their unwillingness to accept this as any major issue. The whole of the European pack was trading in the positive and closed up last evening. But reading too much in these mild responses could be too early. The hurt egos of the western world capitalist rulers could see something more happen.
Asia which has been reeling partly under the western influence including the Crimean crisis and partly under fears of a Chinese slowdown is doing well this morning. But the fear of Crimea coming back to haunt the markets is keeping almost all of this pack on their toes. The Shanghai Composite and the KLSE Composite have marginally turned negative as of now, but the remaining pack is doing well. The Japanese Nikkei is up almost one percent, while benchmarks of Korea, Taiwan and Indonesia are trading an average quarter percent up. Singapore is trading on the brinks with a slightly positive bias as of now and the SGX Nifty is currently trading up 16 points.
That sets the context for the opening of a holiday curtailed week in India. Markets look all set to open with a positive bias and trade that way throughout the day. There is a limited amount of data flow this week to which the markets will be looking at in the domestic setting. A range bound week for the benchmarks is in the offing. Of course a closer watch on the international scene is needed as that could set the tone for the immediate future.
