The week ahead should see an event risk unwind with results from UP elections deciding the future direction of markets. The results will have a huge bearing on the forthcoming Union Budget as the ruling Congress coalition tries to win back lost ground. Markets will also have to contend with a holiday shortened trading week and global cues with oil prices taking the centre stage.
This year we have seen inflows of almost $7 billion by foreign institutional investors. Some of these could be ‘hot money' or short term exchange-traded funds who could exit quickly. However, bulk of the major inflows seem long-term and would stay the course. Globally, markets have reacted positively with banks now being recapitalised aggressively. The “Risk On” trade should be back. Also, Spanish and Italian bond yields are trading at a six-month low giving more comfort to investors to get into riskier asset classes.
Last week, the Nifty range for the week gone by, was between 5330 and 5540. This week, we could see the Nifty oscillate between 5230 & 5540 as event volatility would be higher and we will see the future direction of the markets being chartered out. We have seen some much needed consolidation for the markets and the next fortnight should see the market break out from this range after the event calendar unfolds with election results, union Budget and RBI policy playing out.
Last week, the Nifty closed lower for the second straight week losing 1.29 per cent at 5359 and the high beta Bank Nifty shed 0.7 per cent at 10434. The GDP for Q3 came lower 6.1 per cent against 6.9 per cent in the second quarter of 2011-12. The ONGC share sale auction was a big disappointment with LIC and a clutch of PSU banks having to bail out the government.
This again highlights poorly thought out disinvestment strategy, with market timing and operations leaving much to be desired.
Most Asian markets entered the “New Bull Market” with indices up 20 per cent from lows touched in December 2011. Locally, top A group gainers were East India Hotel up 18 per cent, Hindustan Copper up 16.43 per cent and Indiabulls Financials up 13.81 per cent. Losers included DLF down by 10.53 per cent, Sesa Goa down by 7.63 per cent and Essar Oil down by 7.27 per cent.
Factors to Watch Out:
1. UP Election results.
2. Global liquidity
3. Oil Prices and Geo-Political Risk.
4. Local Bond yields/Rupee and Foreign Fund Flows.
5. Nifty range between 5230-5540.
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