Factors investors need to track that have a bearing on stock market movements in the near term

The stock markets had been in a bearish phase since the last few quarters. However, the previous quarter's stock market indices registered a positive closing (up 1.5 percent). This is due to the sharp rally seen last month in the markets. Some experts are of the opinion that the markets have bottomed out. According to them the current rally has some steam left to take the markets upwards from the current levels. On the other hand, there are analysts who argue the current rally is just based on some initial data of economic recovery in the global markets and investors should watch further data points and market trends cautiously before assuming a bottom out in the markets. There are some important factors investors should track closely in the next few weeks.

1) Relevant global issues:

• Economic growth in developed economies

The overall economic growth numbers of developed countries will be an important issue. Many large economies confirmed negative economic growth over the last couple of quarters. It will be interesting to watch the results in the last quarter (first quarter of 2009).

• FII investments

Foreign institutional investors (FIIs) have been the key drivers of markets here during the last few years. They have been selling equity in emerging markets and withdrawing funds since last year. FIIs turned net buyers in the domestic markets last month and the markets are going up again. Investors should watch FII movements in the markets.

• Corporate results

The slowdown in the housing and financial sectors gripped the other sectors during the last quarter. Investors should track the first quarter results of large multi-national companies (especially companies in retail, auto, insurance etc) closely.

• US consumer data

The trigger of the current slowdown was the US housing sector. The US government has announced several relief packages and rebates for home buyers. It will be interesting to watch the monthly and quarterly sales numbers of new houses. Also, the tax relief given by the government is expected to drive other consumer activities. It will be good to track the US consumer data over the next few months. It is important to watch the trends as just one data point might give a wrong indication.

2) Relevant domestic issues:

• Results and annual guidance

This is the annual results season for the first quarter of financial year 2009-10. The annual results of this year will be quite interesting as the overall economic condition was challenging for many companies. It is interesting to watch the annual numbers and listen to the company managements on the next year's business prospects.

• Fiscal deficit

The fiscal deficit has gone haywire this year due to the lower corporate tax collection, discretionary government spending on account of fiscal stimulus, and lower inflows from foreign institutions. Some large rating companies have expressed concern on the worsening situation of fiscal deficit. It would be interesting to watch how FIIs and global investors react to any downward revision in the investment ratings.

• RBI action

The Reserve Bank of India (RBI) has softened the monetary policy quite significantly during the last six months. Since inflation has dropped down to virtually zero percent, analysts are expecting a further cut in the key policy rates and reserve ratio by the RBI. Investors should keep a track of RBI's moves in this regard.