Last week witnessed the Sensex and the Nifty scaling to 28,335 and 8,477 backed by positive global cues and merger of ING Vysya with Kotak Mahindra bank. The merger also sent banking stocks higher on last Friday. The focus of the investors will be on the upcoming RBI policy meet on December 2nd and the developments in the parliament session. Fast policy execution and positive announcements will be required for the Indian markets to sustain the current momentum. The third quarter GDP data which is expected by the end of this week will provide further clues as to what could be the decision of the RBI governor in the upcoming policy meet.
Going ahead, the expiry of November derivative contracts could bring more volatility into the markets. The open interest on the national stock exchange is now above Rs 240,000 crores and the put all ratio is above 1. This indicates that this time the derivatives expiry may bring more volatility into the markets. Should there be a short squeeze, the markets will gain further.
The market continues to consolidate at higher levels with the sensex at 28,047 and the Nifty at 8,390. It’s the highest ever closing levels for both the benchmark indices. But if you look closely, the indices are moving in a tight range of 500 and 100 points respectively. There is no sharp correction and at the same time, the indices are not surging ahead .This means – the buyers are nervous at the higher end but they’re buying in dips.
Going ahead, pleasing economic data such as lower inflation levels, growing industrial production numbers and low crude oil rates are paving way for more pressure on the RBI to reduce interest rates. If that’s going to happen, it will propel the markets to even higher levels. On the other side, if the Gold and crude oil rates bounce from the current levels, it could lead to stagnation in the equity markets and this may prompt investors to book some profits. Consolidation is a sign of investor indecision in the markets and a break to any one side is inevitable. It’s to been seen who will make the move first.
There was sudden excitement in the markets as the sensex broke 28,000 last week. The star right now is the declining crude oil prices which will definitely improve the fiscal deficit and inflation numbers in the coming months. With most of the blue-chips already participating in the upward surge, the trend has now shifted to Mid-caps and small cap stocks. Heightened activity was seen in most of the counters which was reflected in the CNX midcap and BSE small cap surging 1.7%. With the economic scenario looking better for the moment, the call for lowering interest rates by the RBI is also growing louder.
Last week saw the Indian indices bouncing to new highs, surpassing our expectations – thanks to Bank of Japan whose surprise bond buying stimulus send the Nikkei index 5% up and also kicked off a global bull-run in stock markets. The expiry of October derivative contracts also helped the Indian stock prices move upward in the earlier part of the week. From the fundamental point of view, the market action is getting irrational. However this week, the stock markets are likely to have a sub-dued action due to two holidays on Tuesday (on account of Muharram) and Thursday (on account of Guru Nanak Jayanti).
Going ahead, the short term trend of the indices will depend on how it moves on Monday. A close above the previous high of 27,354 and 8,180 will sustain the momentum in the markets. The governments’ decision to bring back every penny of black money stashed abroad and the not so impressive second quarter earnings of corporates may have a negative impact on stock markets. Most benchmarks also sold off sharply before this upward movement which shows that it’s not fundamentals that are pushing the indices up. The current momentum, if continued, can push stock prices up further which may give opportunity for investors to book some profits. Fresh exposure of funds would be a risky at this point of time.
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