With the derivative settlement coming up on Thursday on the NSE, intra-day wild swings are likely to continue this week as well. However, with major events such as the UP election and the Union Budget behind us, key benchmarks, the BSE Sensex and the NSE's S&P CNX Nifty are likely to move within a range of two per cent. The next big cues for the market are the fourth quarter results and full-year performances and guidance of corporates. Till such time, the benchmarks are likely to move in a narrow band.
The move by the new Railway Minister, Mr Mukul Roy, on March 22 to rollback some of the tough proposals in the Railway Budget due to populist demands unnerved investors. Besides, weakness of the Indian rupee against the dollar also added to concerns.
However, foreign institutional investments, which have been pouring continuously and topped $9 billion this calendar year so far, are likely to continue for want of risky assets.
Recently, Goldman Sachs upgraded Indian equity market to “Market Weight” from Underweight. “In short, we believe the global factors that have weighed heavily on India over the past year (i.e. European credit concerns) have largely abated, the domestic growth cycle may re-accelerate heading into the second half of the calendar year, and the uncertainty risk around the Uttar Pradesh elections and the Union Budget for FY-2013 are now behind us. Furthermore, we see upside to consensus EPS growth estimates for 2013 and we find valuations to be relatively attractive in India, certainly more so than they have been since the Global Financial Crisis,” it added, while fixing a year-end target of 6,100 for the Nifty.
However, another global major Morgan Stanley had a different take on Indian markets. “To us dividends are crucial when making investments for many reasons. Most dividend paying companies do so because they have the cash flow – so it acts as a verification of cash flow. Rarely can companies sustain dividends by borrowing money,” it said in its report and added: “If the Sensex dividends were reinvested, the Sensex would be at 21,200 instead of its current level of 17,300. For Indian residents, dividends are tax-free and hence their contribution to post tax returns even higher. The current forward yield on the Sensex grossed up for marginal rate of tax is 3.3 per cent.”
NAV prop-up
With this fiscal coming to an end this week, fund managers may resort to NAV propping up exercise to boost their performance. This could help stocks regain some momentum. However, with fund mangers now concentrating on individual stocks rather than index heavyweights unlike earlier, the exercise may not result in the benchmark index gaining.
Global tension
However, geo-political tensions could spoil the sentiment globally: North Korea said on Saturday that it will launch a rocket next month to mark the centenary of founder Kim II Sung's birth. The rocket launch, which the US and other countries say is the same as a ballistic missile test, is banned under UN resolutions. The US President, Mr Barack Obama, on Sunday urged China to use its influence to stop North Korea's “bad behaviour” in a nuclear standoff with the West and hinted at tougher sanctions if the reclusive state goes ahead with the rocket launch next month.
Commodity
Gold, despite a strong gain of over one per cent on Friday, has lost close to two per cent this month. The metal is likely to move in a range this week around $1650-1675 an ounce.
Oil prices were facing selling pressure. This week, Nymex crude is likely to hover around $105-108 and Brent around $120-125 a barrel.