Expect A Volatile Expiry Today

The Indian equity markets do not seem to be taking any breather and is making a fresh high every day. Yesterday also the indices closed in positive zone to make anther all time high closing for the Sensex. While the Sensex closed at 22095 the Nifty closed at 6601.

If we look into the factors behind such a smart surge in the indices, the strong FII inflow is the prime factor. Just to put the figures in perspective, the FIIs on YTD basis have invested more than Rs 17614 Crore. And around Rs 15495 crore has arrived in month of March 2014 only.

This is despite the fact that the US Fed has cut the bond buying by another USD 10 billion continuing the taper it has started in 2014. This was expected to be a dampener for the emerging markets as the excess liquidity would have reduced. However we feel India seems to be a good house in bad neighborhood. There are various factors behind the same. First and the foremost is, there is biggest event lined up in the next month (the elections) and secondly despite a steep up-move in the past few trading sessions (taking the market to all time high), the markets are not overvalued. The P/E of the Sensex is still only at 18.50 x which is lower as compared to when the markets had made a new high in 2008.

Another factor is, the INR has appreciated against the USD.INR is fast approaching mark of Rs 60 per USD. Yesterday it made a eight month high against the USD. So this very fact is also good on the macro front.  

Another factor which is likely to keep the investors upbeat in the short term is, clarity is expected on the banking licenses front on Monday (March 31st 2014). Here we feel, any positive action on this front would help the markets move northwards.

While these are the factors on the domestic front, the global markets are providing mix picture. The US markets witnessed a decline as the US President cautioned against arrogance of Russia on Ukraine front. US may put some Economic sanctions against Russia which has again created some geopolitical pressure. As a result the US Dow closed in red with a loss of 0.61% and the S& P also closed in red with a loss of 0.70%. The impact is also seen on the Asian markets as Nikkei is down 1.20% and other markets are trading almost flat. Shanghai Composite is also trading in red with loss of 0.18%. So the global markets are providing a mixed picture.

While these are the factors on global front, the most important event for the Indian markets is he March Month expiry today. If the markets manage to close in positive zone, this would be one of the most positive expiries for the Nifty in last one year. In this expiry the Nifty has already surged by more than 6%.

We expect the Indian equity markets to open on a flat note today. The SGX Nifty is trading at 6618 (Up 7 points). While the opening might be flat, there is possibility of profit booking taking place. This would take the markets in negative zone.