State Assembly election results
The investors will be eagerly looking forward to the exact results of the state assembly elections on Sunday after the post voting polls indicated a resounding victory to BJP a party whose leadership is perceived to be more pro-business and aggressively reform oriented. In case there is a major deviation in the results from the post voting polls, markets are expected to dip sharply and fundamentals may take over much sooner than anticipated.
Currently, the traders perceive the state assembly election results as the proxy to the general parliamentary elections due in May '14 and in this regard are considering the BJP upsurge as a pre-cursor to the cyclical reversal of the country's macro parameters due to its policies. In case the results are similar to the post voting polls, we may see quite a momentum in the cyclical sectors like banking, infra, capital goods, real estate etc. something similar to what happened in 2003 and 2009 when cyclicals led the markets on bottoming out of the economy before fundamentals again take over as we approach the general elections and uncertainty increases.
FOMC meet
Not only the general elections, but the Fed's stance on tapering in the upcoming meeting on Dec. 17-18, the debt ceiling issue and budgetary impasse in US will pop up again early next year which is expected to keep the markets on tenterhooks in the short term. Infact, US Senate and House negotiators face a December 13th deadline to reach a compromise on a proposed budget.
Apart from the improving macro data coming out of US, the Friday job report showed that US employers hired more workers than expected in November and the jobless rate hit a five year low of 7 percent which has raised chances that the Fed could start tapering its bond buying stimulus as soon as this month. To be noted is that even if tapering starts the other components of stimulus may remain as they are.
November trade data
As far as macro data on India is concerned the week starts with trade data the imports and exports for the month of November on Tuesday. Decline in gold imports and turnaround in exports helped narrow India's current account gap sharply and the momentum in exports is expected to continue on the back of recovery in the developing economies the trade partners of India.
November CPI
On Thursday, we have the November CPI expected to come down gradually as the fresh harvest has arrived into the markets which is expected to ease the food inflation and October IIP which given the trends in our exports and expansionary trend witnessed in HSBC Markit Manufacturing PMI for November, the first time since July, driven by rising new domestic orders, the IIP for October may indicate early trends of bottoming out.
While the focus will be on Chinese inflation and industrial production figures, in Eurozone release of October industrial production data will be offering the first glance into the economic strength, or lack of it, into the fourth quarter.
(This article has been contributed by Mynte Advisors)
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