Manoj Ladwa, head of trading at TJ Markets explains to CNBC-TV18 that the European markets will end the year on a positive note and that the current volatility in the market due to mixed economic data from China and troubling political developments in Italy may not be a negative because it encourages volume and increases trading.
Below is an edited transcript of the analysis on CNBC-TV18
Q: What do you make of the fact that the markets did not react as negatively as expected to the developments in Italy and in fact, several of the core markets closed either flat or a tad positive?
A: It shows the seasonality of the market. It is at that time of the year where one tends to see some window-dressing with fund managers buying stock in order to make their portfolios look good for the year-end numbers. So every time there is negative news such as the mixed economic data from China in the last 24 hours or Italy, the market dips but some buying starts to come back in.
So investors do have money and they are deploying it in riskier assets such as equities at the moment. Whether that will continue into the New Year and whether fiscal cliff issues continue to be a problem with the euro and the eurozone continues to be a problem, remains to be seen in the first six months of next year. But the markets, at the moment, seem relatively robust.
Q: Is that how you expect they will react to the continuing news-developments in Italy given that the expected election is now going to be held much earlier than anticipated and with Berlusconi having thrown his hat in the ring?
A: I think the Berlusconi issue has added a spanner in the works with regards to whatever is going on in the eurozone. It only adds to the volatility, but that volatility seems to be kept fairly well in check at the moment. So that volatility is going to remain and it may not be a negative because it encourages volume and increases trading and that’s what the markets need at the moment because volumes are still fairly low.
Q: How do you expect European markets to end the year?
A: I think they’ll still end the year on a positive note as usually December is a fairly good period for the market. So I expect the equity markets in Europe to end the year on a positive note. But the New Year does bring issues that have continued to trouble throughout the last few years anyways. So we are going to see heightened volatility into the New Year at least for the first six months or so until some of these issues start to get resolved.