The market has more or less priced in the outcome of the exit polls, but what market participants must also remember is that impact of US jobs data, which was announced on Friday evening, will also reflect in Monday's trade. So given that we are just about a 100 point away from an old-time high, it is going to be a very interesting start to next week, said CNBC-TV18's Udayan Mukherjee.
The US employers hired more workers than expected in November and the jobless rate fell to a five-year low of 7.0 percent . According to Mukherjee what one can make out the reaction seen in the US market on Friday is, maybe the market expects the US Fed to start tapering with baby steps - maybe USD 5 billion a month and nothing more significant than that, so for the markets the USD 85 billion will come down to USD 80 billion and markets have more or less priced that in. Even bond yields hardened a little bit and then cooled down and that may have been because the market has been anticipating this possibility for so long that it is now ready to live with it, he said.
Secondly, the US data turned out to be surprisingly good. Markets have been very fretful about poor economic data in the US and in Europe of late, therefore the equity market's view is if growth is good in the US and things are not collapsing as badly as might have appeared a couple of months back, then there is no reason for it to go down just because USD 5 billion of liquidity will become less starting next month, he elaborated.
Meanwhile, he feels that India is much better prepared to deal with QE taper now because of the way the Current Account Deficit (CAD) has come down. Even few months back before gold imports started coming down, financing India's CAD was such a big problem that even the first hint of the word taper would have led to a massive selloff in the rupee and in the stock market, he added.
"But now with the way the CAD has behaved of late in the last couple of readings, also the fact that this whole taper business has been well advertised and had been spoken about for the last two-three months ad nauseam markets are probably much better prepared for this taper right now," Mukherjee explained.
He doesn't expect a massive negative reaction from the Indian market. "Markets might plateau for a bit, but given that global markets have done so well with the data which came out last night, probably on Monday the political news in India may just be holding center stage," he added.
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