A Sluggish Start Is Due Today
Currently there is just one factor that is driving markets, not just in India, but globally. Corporate results for the December quarter of 2013 have made markets very stock specific in nature. The trend so far has been a rather mixed one with no big surprises on either side. The focus will now gradually shift to what the RBI will do to the monetary policy. While a consensus has evolved around maintaining a status quo, there is every possibility that the Governor may go against that consensus and cut rates. If that happens, the markets will not look back until a black swan emerges.
The biggest worry of recent times, burgeoning inflation, seems to be behind us, at least for now. Both the CPI as well as the WPI are showing signs of receding, thanks to an improvement in the supply situation. This has basically led to the market concluding that rate hikes are a past and that you could actually be looking at some rate cuts to spur growth.
Growth is already on the uptick. Global agencies are repeatedly voicing their optimism about the prospects of India getting back to a decent growth in the next couple of years. The IMF is looking at India growing by 5.4% in FY15 after a 4.6% growth that it is likely to register this year. According to the IMF, a good monsoon and higher exports, following a growth uptick in other regions, particularly the west, are already helping the Indian economy. That is expected to bring in further traction, based on which the growth estimates are placed. In fact, growth for FY16 is being pegged at 6.4%. These are a shade lower than what the World Bank has recently projected for the two years.
The growth upgrades for the economy are coming in at the most opportune time. 2014 is looking to be that critical inflection point from where India will once again shine. But all this comes with a caveat. The desperate need for good and pragmatic governance is getting accentuated. Hopes rest on a stable government assuming power, which can make some good decisions and push growth.
Meanwhile, markets are currently trying to seek direction from the overall shape that corporate balance sheets may take following their performance in this quarter and the next. However, yesterday was dominantly driven by the IMF report on global growth. Europe closed in the green and the US markets continued to ride on corporate results, where some were in line with expectations and some missed the mark. All in all the sentiment is positively biased at least for today.
Asian markets are trading mixed this morning following diverse factors for various regions. While Japan is awaiting the conclusion of its monetary authority meeting and as a result the market there is trading on a flat to negative note. China is just about positive with the Shanghai Composite trading up 0.12%, while the Hang Seng in Hong Kong is down 0.03%. Where Indonesia is trading up 0.47%, Malaysia is down 0.57%. Singapore and Korea too are marginally down, while Taiwan is trading in the green. There isn’t any clear direction that the markets have taken this morning. Trading on the border, the scale could turn in any direction as the day progresses. Overall it looks like a flat trading day.
With such flat global cues, and no major trigger on the domestic front, you could see the Indian markets too follow suit. With the SGX Nifty trading in the red as of now (down 16 points), we could see a flat to negative open for the Indian market too. As mentioned earlier, on daily basis, it still remains a stock specific market to track. There is nothing much on the macro front except for big talk and day dreams on the growth front. Policy measures are yet to take off in a big way and even if they do, yielding results will take some time. Flow with the wind as it comes. Don’t get overly enthusiastic by these rosy statistics of growth that are being thrown at you as of now.