Global cues to dictate market trend in truncated week

All eyes will be on Greece and the euro zone this week. Monday, February 16 is the last date Greece can apply for an extension as the current bailout programme expires on February 28.

Given the state of the Greek economy, there are limited possibilities for the country. The markets are also anticipating that a middle path would be worked out between Greece and the European Union.

The Greek government has been pushing for a bridge loan, which will give it more time to negotiate for the bailout package. In the short term, concerns have receded of Greece moving out of the euro zone.

But until the bailout package is not negotiated, uncertainty of Greece moving out and the domino effect thereafter will continue to put pressure on the market.

Back home, the Indian equity market last week bounced back after two weeks of a losing streak. The domestic market will start building positions ahead of the Budget.

In the immediate short term, most negatives have been discounted by the market. All eyes will be on the Union Budget 2015 now amid expectations the government will kick-start its reform process.

The government has signalled time and again it stands for growth and the spending focus will be more from the developmental and growth aspect than social spending. But it will have to be seen how the government plans its spending in the Budget that will promote development and start the investment cycle.

Among MSCI emerging market peers, the Indian market year-to-date is still the second-biggest gainer after Russia.

But in February, the Indian market is at the bottom of the table among emerging markets - there is no immediate trigger in the market because everyone is waiting for the reform process to start.

If interest has to remain in India and the Indian market, the country has to attract foreign investments and the government has to increase its spending.

Meanwhile, this week the financial markets are closed on Tuesday on account of Maha Shivratri. On Monday, the government announced the wholesale price index (WPI) inflation data for January.

WPI inflation was at -0.39 per cent last month, compared to 0.11 per cent in December 2014, with falling crude oil prices playing a key role. That was actually better than market expectation of WPI inflation to be around 0.4 to 0.7 per cent in January.

This week, the Bank of Japan will meet to review its monetary policy. Not much is expected to change in its monetary policy stance.

The Bank of Japan has kept the interest rate at record low levels and is buying bonds to increase the monetary base at the rate of 80 trillion Yen a year.