This week, markets will remain volatile and the investor, low on confidence.
Volumes on the NSE and the BSE will pick up later this week once institutional participation resumes after New Year.
Though the street has doubts on whether 4500 levels on the Nifty would sustain, it anticipates short covering if these levels are hit.
After the overwhelming response to the NHAI issue, two more bond issues have hit the market. The first is Power Finance Corporation's (PFC) Rs 1,000-crore issue which comes with an option of retaining over-subscription up to Rs 4,033 crore.
The second is SREI Infrastructure Finance's Rs 300-crore infra-bond issue, a long term tax saver. This means little respite for other tax saving instruments with PFC bonds already very close to over-subscription. There is buying opportunity in 10-year government securities (G-Sec). Yields are expected to hit 8.25 per cent levels from last week's close of 8.65 per cent on the back of Open Market Operations by RBI.
The Reserve Bank has already done OMOs worth Rs 4,000 crore last week.
Bond traders foresee very low inflation number of 7.5 per cent, though the actual number will be reported this week. Automobile sales and cement numbers will also come in this week.
There is also an expectation of very weak Index of Industrial Production (IIP) number at 1.5.
With this, fixed income dealers see a 25 basis point rate cut in the near future.
The rupee will be range bound between 52.75 and 53.35 to a $ with a bias towards a slightly strong $ this week.
The second quarter current account deficit in India has widened to 3.7 per cent of GDP at $ 17 billion mainly due to import of gold. However, it would temper down to around three per cent by March- end of this fiscal on increasing inward NRI remittances and decrease in import of gold and non-oil imports.
On the global front, traders expect the Euro to be weak against the $, with one Euro hovering around $ 1.2810 levels this week.
This stems from continued fears of sovereign defaults in Europe, especially Italy whose bond yields have consistently remained above seven per cent in the recent past.
The fears are strengthened by Italy's borrowing programme of €450 billion for 2012, which according to investors, is huge, given its existing debt to GDP ratio.
The dollar index (DXY) would move between 79 and 81 and yields on US 10-year treasury would be range bound between 1.75 and two per cent.
Finally, data expected globally this week includes the German data on change in unemployment (forecast at minus10,000) and the Euro zone retail sales for November 2011, which is expected to decrease by 0.9 per cent over last year.
The US Fed will release the minutes of its December 13, 2011 meeting. Other December data on the anvil from the US are the ISM manufacturing index (forecast at 53.2), rate of unemployment (forecast at 8.7 per cent) and change in non-farm payrolls (forecast at 150,000).