Fragile start; Global factors weigh

Change is inevitable, growth is intentional. - Anonymous.

Strong Q2 GDP growth has sparked hopes of India hitting the 9% mark for FY11. The fiscal deficit seems to be under control too. The core sector growth improved smartly as well in October. Now we will have to wait for the IIP report and monthly inflation data.



It would be interesting to watch the RBI’s reaction to the upbeat macro-economic statistics. The mid-quarter review is scheduled for Dec. 16 while the quarterly review is slated for Jan. 25. It could increase rates by 50-75 bps next year.

The start today is likely to be a subdued one given the murky global outlook. However, there is a chance of a bounce back provided the external picture improves.

US stocks closed in red despite encouraging consumer confidence data. European markets fell amid persistent worries over the sovereign debt situation. The euro slid below the $1.30 mark, while the spread on Spanish and Portuguese debt hit new record highs.

China’s manufacturing expanded at the fastest pace in seven months in November. Keep an eye on monthly auto and cement sales, trade data and manufacturing PMI.

November was a bad month for the bulls, not just in India but also across the globe. The Sensex lost 2.5% last month while November was the first down month in three for top US stock indexes. So, December will be an important month for the global equity markets.

The European debt situation will continue to have a major bearing on the sentiment until there is some softening in the bad news coming from that continent. Any monetary tightening by China could also sour the mood. US data points will of course continue to hog the limelight. Hopefully, the geopolitical situation on the Korean peninsula will not deteriorate further.

The ECB will meet on Thursday for a monetary policy review. The ECB could be under pressure to abandon any plans to exit its ultra-easy monetary policy. The monthly US jobs data on Friday will be watched closely. Manufacturing PMI data will be out from across the globe on Wednesday.

FIIs were net buyers of Rs 8.89bn in the cash segment on Tuesday while the domestic institutional institutions were net sellers of Rs 4.35bn, according to the NSE Web site. FIIs were net buyers at Rs 14.44bn in the F&O segment on Tuesday. The foreign funds were net buyers of Rs 2.72bn in the cash segment on Monday, as per the SEBI data.