The January Harvest Festival confused many a time for th eNew Year comes just before the Chinese New Year itsel fand the markets in india still have large sections of intermediaries and businesses that belive in the hindu rituals and cycles as key to business starts and inventories as well.
Sankranth however seems to be heading for a showdown of the Gods with Consumer inflation hitting the high notes at 10.56% on this late morning report and WPI to follow close on the heels, though the WPI need not reflect this aberration of the CPI immediately. It does seem likely that we are not going to get any rate cuts despite the production stops and Nifty at below 6000 may well have peaked out for another burst and will again rest at above 5900 or maybe one slide down at 5940
The Euro in the meantime restarted a new week with the resurgence that has become so typical of the currency since it hit a bottom in April at 1.20 and the revival of the hopes of a banking union are around the corner and likely to follow a greatly accelerated calendar given the despair surrounding the last catechism of banking union ‘talks failed’ after the one of its demise.
The Pound unfortunately seems to be the loser in the run of currencies coming back ont he strength of China trade and that means India’s flagging trade deficit with Imports not under control yet Exports rose only 6% ofor the month and will rise less than 5%-10% on the year and europe’s losses as a market are not covered by others including our metals and Cotton exports to China
European WPI has already shown indications of a recovery in last week’s data and if indeed Indian WPI is below 7%-7.25% it would be a real bout of irrational exuberance for equities as US also rules near new peaks and Europe is now never down. However, till a case for a change in the interest rate cycle is established it would be a false promise that is lwikely to be as quick a destroyer of wealth as the rise. Bnaks continue to cede with Yes Bank and Kotak and indusind likely to do well. IDFC and the Power NBFCs are unlikely to lose current levels