Swapnil Suvarna expects the market mood to remain sluggish in the weeks ahead. He feels that the domestic and US Q3 2011 corporate earnings due to be announced this week alongwith positive developments in the euro-zone will set the tone for the domestic markets.
The Sensex and Nifty ended last week at 15,849 and 4,747, respectively, gaining 394 and 123 points, respectively, led by positive developments in the domestic markets and across the board buying by institutional investors.
The week opened on a positive note following reports that the Indian government allows qualified foreign investor (QFIs) to invest directly in the Indian stock market, thus helping in attracting more foreign funds. Also, data showing a sharp improvement in the manufacturing activity in the December 2011 quarter led by a surge in factory output, and new orders from domestic and international firms alongwith the comments from the RBI Governor that the central bank is likely to begin easing monetary policy to address concerns about economic growth improved the market sentiments.
However, the domestic markets negated reports of a decline in the food inflation on fresh concerns about the health of European banks on reports that Spanish banks will have to set aside as much as 50 billion euros ($65 billion), which amounts to 4% of Spain’s GDP, in extra provisions on bad property assets. Moreover, lower-than-expected Europe’s industrial orders rise and higher borrowing costs in a French bond auction deepened concerns of Europe’s debt crisis.
Week Ahead
We expect the domestic markets to stay in limbo. The major trigger for the domestic markets would be the Q3 2011 corporate earnings, due to be announced this week, which would give a clear picture on the growth outlook for the year 2012.
Developments in the euro-zone will be closely watched since the French president is supposed to meet German chancellor on January 9, 2012 on talks regarding new rules to enforce budget discipline across the European Union (EU). However, optimism in the US economy and corporate earnings will lead to short spells of rally led by bargain buying by institutional investors.
Suggest your clients to invest in quality equity funds through SIP and be least impacted by the current market uncertainty. (Read: 5 Best ELSS Funds for your clients)
In addition, consider suggesting Income and Gilt funds since the 10-yr benchmark bond yield have begun easing further to the current levels of 8.2%.
