Near term outlook for global markets clouded

That pegs us back today once again as the economic data from the US has failed us. We have to see whether we can preserve some of the gains of yesterday on a weekly closing or we get pegged back right into that trading range again, said Udayan Mukherjee, managing editor, CNBC-TV18.

The US manufacturing data and the economic data is disappointing. That is not good news because we have just come out of a Fed meeting. The Fed said that it will hold its fire power for sometime till things warrant a QE3 and immediately after that we have seen the economic data worsen quite a bit. Also the Moody’s downgrade of many banks did not help yesterday at all.

For the last few weeks and days we have all been freighting about Europe and the risks from the Europe, but now if it is presented to the market that the US will weaken and the S&P starts fading from that 1,350 level from which it dropped 30 points yesterday and goes in for a medium-term correction, then global markets might struggle a little bit in the near-term. So it is a one day sell-off prompted by data so it is premature to take that call, but it certainly looked difficult the way the data came out yesterday.

Also the currencies have not moved in the direction that equity markets would have liked. The dollar index respite all hopes of QE3 has now gone back to 82.25, which is what the markets would not have liked to see. The euro made a brief attempt to 1.27, but has come back once again to 1.25. These are not good for equity markets per se.

But let us see if yesterday was a savage sell off, if it was a one day or two day kind of sell off and whether today the euro meeting throw up something on the ESFS use front which the markets might like. There is too much news flow and the near term outlook looks very clouded.

Our market has done okay for this important newsy month. The market is up about 4-5% still and the overwhelmingly good news is still from the commodities front. That’s the question which investors would be asking themselves that there are pockets when India underperforms global markets and there are pockets when India outperforms global markets.

So far we have seen some modest signs, it’s not dramatic but some signs that India is just beginning to outperform a little bit. Take yesterday’s case in point, most markets seem to have sulked a little bit because of the absence of QE3. We closed quite well. Crude may be one reason because its down to USD 89 now and that changes India’s macro somewhat. It is ot a guarantee of near term outperformance, but it certainly is favorable from Indian macro point of view.

Conversely the rupee is not inspiring too much confidence. If the rupee was at 54 now, you would have found more global traders and investors being a little bit more positively inclined to India than they are now. The rupee is a little bit of a headwind which is taking away a little bit of the feel good or relative feel good because of the crushing of crude prices.

Today is an important day because today many global markets will be down. Let’s see if by the end of the day even if we start lower we can once again demonstrate with some price action that downsides are reluctant and the market is ready to outperform. So today’s outcome is quite important in establishing that.

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