The truncated trading week is likely to see the benchmarks move in a range unless Greece or Euro-zone throws up some adverse developments. Foreign institutional investors would resort to heavy selling if trouble in the Euro-zone worsens.

The stock market is closed on Monday on account of Bakri-Id and on Thursday on account of Guru Nanak Jayanti.

With most of the companies having declared results, there are little cues that could give the market direction. The proposed State Bank of India officers' strike may keep the volume low.

The much-hyped Group of 20 or G20 meeting was expected to come up with a clear plan to rescue the Euro-zone. But the talks failed to generate a positive vibe in the markets. The meeting ended on a quiet note with no country committing to invest in the European Financial Stability Facility — the Euro-zone bailout fund.

Greece is sending worrying signals regularly, as pressure was mounting on the Prime Minister, Mr George Papandreou, to step down after he was forced to cancel a referendum that may have led to Greece being ejected from the Euro-zone. The country is trying hard to preserve international aid before it runs out of money next month.

Meanwhile, the European Central Bank unexpectedly lowered interest rates and its President, Mr Mario Draghi, said the region is heading toward a mild recession.

The domestic scenario is also throwing up negative cues. Growth in net indirect tax collection moderated sharply to 8.6 per cent in September after growing at a robust 25.7 per cent in April-Aug 2011. This suggests that economic activity has started to lose steam.

A steep rise in food inflation and the recent hike in petrol prices are also weighing on sentiment. Oil companies were forced to hike the petrol price because of high crude oil prices in the global market and depreciation of rupee against dollar, making imports costlier.

“Given trends in revenues and expenditures, we maintain our view of a minimum slippage in the deficit to 5.1 per cent of GDP. This could rise to 5.8 per cent if the Government does not defer the under-recoveries payment to the oil companies,” said Citi.

According to Bamboo Shoot Advisors, “Irrespective of whether we are in another bear cycle or a prolonged correction in a bull cycle, historical evidence says that the current level of P/E of around 18x and a correction of 22 per cent by September 30 can't be defined as a bottom as yet. We may not be able to predict which way the market will go from here, but if history is any guide, we certainly can't call the current level of the market as ‘Cheap' either.”

So what should investors do in these times of uncertainty? The predominant trend will continue to be risk aversion and flight to safety.

“Macro headwinds have resulted in lower risk appetite among investors globally. While India is deemed a “high risk” market, that risk varies enormously across stocks. During times of uncertainty and high volatility companies with high dividend yield and high ‘earnings certainty' should represent better investment opportunities,” says a note from Espirito Santo Securities.

badri@thehindu.co.in

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