Sentiment remains bullish at Dalal Street, as market participants, particularly traders, are more buoyant. This week, equity markets may see a range-bound movement with positive bias.
Year 2012, which started on a apprehensive note amidst worries from all corners, turned around smartly to give handsome returns to investors. The BSE Sensex and the NSE’s Nifty rose more than 25 per cent this year.
With liquidity gaining momentum each passing day, particularly from foreign institutional investors, experts now believe that the bull rally has already set in. However, things can go awry if pressing macro issues are not addressed immediately.
The issue of the US fiscal cliff, which should have been sorted out by this time, is still dragging on, giving jitters to global investors.
A failure to arrive at a consensus between the US lawmakers and President Barack Obama to prevent US from going over the cliff could send equity markets into a tailspin.
The failure would immediately kick in spending cuts and tax gains worth over $600 billion from January 1 and that will result in world’s largest economy falling back into recession. On the domestic front, containing ballooning fiscal deficit below 5.3 per cent would be a big challenge for the Finance Ministry. Already, the Government embarked on disinvestment programme as well as spectrum auction to contain the fiscal deficit. Additional steps such as higher taxation and a further hike in diesel prices would send a big positive signal to the markets.
Dun & Bradstreet expects GDP to register a growth of 6.8 per cent during 2013 as policy environment improves, investment conditions revive and inflationary pressures abate.
It expects the services sector to grow 8.4 per cent during 2013 due to some expected stability in the global economic environment and restoration of confidence among investors.
“Industrial activity is expected to gain some traction during 2013 and grow by around five per cent led by likely improvement in business sentiment, expected easing of policy rates and revival in the investment activity,” it said.
Data on manufacturing and services sectors will be keenly watched by market participants. HSBC India Manufacturing PMI and HSBC India Services PMI for December 2012 will be out on January 2 and January 4 respectively.
HSBC manufacturing Purchasing Managers’ Index (PMI), which gauges the business activity of India's factories, rose to 53.7 in November 2012 from 52.9 in October 2012. Readings above 50 denote growth. However, the HSBC services PMI based on a survey of around 400 companies fell to a 13-month low of 52.1 in November 2012 from October's 53.8. This data is crucial as services make up nearly 60 per cent of the country’s economic output.
However, analysts see limited downside for benchmarks as fund managers will buy to prop up net asset values.
Among stocks, bank shares may trade with a positive bias next week on hopes of a rate cut from the Reserve Bank of India in its third quarter review of monetary policy 2012-13 (Apr-Mar) on January 29.