The BSE Sensex last week closed above the 20,000 mark for the first time in two years. The big question among the investing community is whether it will sustain at that level, given the relentless sharp surge in recent times.
The benchmarks — BSE Sensex and NSE's Nifty — at least for the early part of the week, will sustain above 20,000-mark, thanks to a strong Q3 show by the index heavyweight Reliance Industries.
With signals emanating from all corners — be it from the Government or private sector or global markets – remaining positive, the market momentum will sustain. However, profit-taking might check the progress during the later part of the week.
Last week, the Government sent right signals to big investors, both domestic and foreign, by partially deregulating diesel prices and by deferring the implementation of anti-tax evasion proposal GAAR.
While partial decontrol helped to boost investors’ confidence, there are apprehensions also in some quarters that the Reserve Bank may not cut interest rates as expected in its January 29 monetary policy.
Marketmen are of the opinion that the decontrolled diesel will fuel inflation further and may not give enough room for the RBI to reduce rate cut.
“We expect inflation to persist at 7-7.5 per cent in the March quarter after yesterday’s diesel price hike. We have hiked our March 2013 inflation forecast to 7.3 per cent from 7.1 per cent. Inflation will then likely go back up to 7.5-8 per cent in 2H13 on hikes in administered diesel prices every month and power tariffs. It should abate to 6.5-7 per cent by March 2014,” said Bank of Merrill Lynch. It, however, continues to expect the RBI to cut policy rates by 25 bps on January 29.
Wooing foreign investors
Already foreign institutional investors have pumped in over Rs 13,000 crore into the Indian equities in just 15 of trading in 2013. With the Government aggressively wooing them through a series of road shows abroad ahead of the proposed disinvestment, the chances of FII flows turning into a flood seem bright.
Foreign news agencies quoting unnamed sources said even the Finance Minister P. Chidambaram, is planning a tour of Asia and Europe, as a record current-account deficit threatens growth.
According to them, Chidambaram plans to hold meetings in Singapore, Hong Kong, Frankfurt and London this month that have been arranged by banks including BNP Paribas SA, Citigroup Inc, Bank of America Corp and Deutsche Bank AG to woo foreign investors aggressively.
Stock-specific action
However, at micro level, stock-specific activity will continue.
This week, HDFC, NTPC and SpiceJet (on Jan 21), Dish TV, Hindustan Unilever, Kotak Mahindra Bank and Polaris Financial Technologies (Jan 22), JSW Energy, Karnataka Bank, Novartis India, Reliance Communications, Sun TV Network, Syndicate Bank and Zee Entertainment (Jan 23), Andhra Bank, Ashok Leyland, L&T, Sesa Goa and SKS Microfinance (Jan 24) and BASF India, Bharat Electronics, Maruti Suzuki, McLeod Russell, Oriental Bank, Reliance Power and Tata Coffee (Jan 25) will announce their September-December quarter financial performance.
These shares will react according to their financial performance.