Hong Kong: The Indian market is poised for a mildly positive start to the trading quarter, building on the momentum from Friday’s huge rally, despite weak manufacturing data out China and South Korea.
As at 7.30 am IST, Nifty futures are up in excess of three-tenths of 1 percent, trading around the 5315 mark. They opened even stronger in the morning, but perhaps in anticipation of PMI data due out from India later today, and in response to weak manufacturing from China overnight and in South Korea and Taiwan this morning, they’ve since drifted down marginally.
Elsewhere in the Asia-Pacific region, markets are a little more mixed. Hong Kong is closed for a public holiday. Tokyo, Sydney and Seoul are up, but Shanghai is down a tick. Official China PMI data that came out on Sunday showed manufacturing activity at a seven-month low; another index of manufacturing activity in the private sector is due out later today. Also today, PMI data from South Korea and Taiwan pointed to a contraction. Taken together, these data points are signalling that the impact of a global slowdown is beginning to bite in Asian economies.
Last week’s deal out of Europe, under which leaders committed themselves to establishing a single banking supervisory mechanism run by the European Central Bank, was well-received by markets, which saw it as the first of many measures towards greater fiscal union. And to the extent that they were pleasantly surprised, since they had not expected anything to come of the European summit, markets rallied all over. Building on the big bounce in Asia, Wall Street too finished strong, with all three leading indices ending up in excess of 2.2 percent.
Back home, Friday’s rally also owes to the expectation of some policy action to end the paralysis of recent months; the hope that some of the more regressive taxation proposals in Budget 2012 may be reversed also fed investor sentiment. Analysts are now betting that the bulls have gained the upper hand, and expect the rally to continue into today. FIIs too are beginning to place their bets on India again.
But for this reversal of sentiment to be sustained, we’ll probably need to see some positive triggers in terms of policy action.
For today, we’ll likely see a mildly positive start, with markets picking up their cues from the data due out today.