If a problem has no solution, it may not be a problem, but a fact - not to be solved, but to be coped with over time.
There is no immediate solution in sight to the lack of clear direction in the market. The fact is we will remain at the mercy of global cues and foreign money. Any domestic booster is usually intra-day in nature like the Friday's reversal post the IIP report. Don’t press the panic button in case of any fresh bad news. Stay alert and stick to a stock centric approach. This week’s trend will hinge on what the Fed says at the end of its policy meeting on Wednesday. Till then, we expect the key indices to remain sideways. The Nifty will continue to trade in a 5000-5200 range. It remains to be seen whether the Nifty manages to decisively close above 5180 in the remaining days of the year.
There will surely be few more speed bumps ahead in some form or the other. The recovery in several parts of the world will be a ‘stop-and-go’ affair, especially in the developed world. It is taking different shapes across the globe, with emerging economies such as China and India better placed. Even within the industrialized world and developing markets, the recovery trend is a mixed one. The crucial event to watch will be the Fed’s ‘exit’ strategy. This will then decide the fate of the dollar, whose weakness has been driving up the risk appetite. How various governments execute their ‘exit’ plans and its fallout on their respective economies is another matter of concern.
What is noteworthy however is that though the market has been stuck in a ‘no-man’s land’ for some time now there hasn’t been a major breakdown in sentiment. Every time there has been a big fall, the key indices have rebounded smartly. The case in point is the Dubai debt fiasco. Even last week, amidst more sovereign debt concerns the market held its nerves. The reaction to the lower than forecast IIP data was exaggerated. So, there is still hope that the bulls will regain their hold unless we are hit by another steroid from the external world. Don't pare your equity exposure substantially. At the same time, wait for some clarity on direction before adding fresh positions. Keep some cash handy as there will be opportunities you can capitalise on in the near term.
Stocks that could be in action today include the likes of Godrej Consumer, DLF, Den Networks, AB Nuvo and PSL.
FIIs were net sellers in the cash segment on Friday at Rs3.38bn on a provisional basis. The local funds were net sellers of Rs71.7mn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers at Rs4.83bn.
Coming to Wall Street's trade on Friday, US stocks managed to post moderate gains as better-than-expected reports on retail sales and consumer sentiment lifted big blue chip stocks. But gains were limited by weakness in technology and the strength of the US dollar.
The Dow Jones Industrial Average rose 66 points, or 0.6%, to 10,471.50, finishing at its highest level of 2009. The S&P 500 index gained 4 points, or 0.4%, at 1,106.41. The Nasdaq Composite index ended little changed at 2,190.31. The Dow and the S&P ended the week higher, but the Nasdaq slipped.
Market breadth was positive and volume was light. Trading volume has been light so far this month and trading more volatile as investors close the books early. As of Friday's close, the S&P 500 has gained 64% since closing at a 12-year low on March 9.
The major US stock indexes are bumping up against multi-month highs, with the Dow flirting with a fresh 14-month high, as of Friday afternoon, and the S&P 500 and Nasdaq sitting just below those same levels.
Retail sales climbed 1.3% in November, the Commerce Department reported, easily surpassing analysts' forecasts for a rise of 0.7%. Sales rose 1.1% in October. Sales, excluding autos rose 1.2% after showing no change in October. Economists thought sales would rise 0.4%.
The University of Michigan's consumer sentiment index rose to 73.4 from 67.4, versus forecasts for a rise to 68.8.
United Technologies rose 2.2% a day after it forecast that profits would rise about 10% in 2010.
Alcoa rose as part of a bullish note on the mining sector from JPMorgan Chase.
The dollar gained versus the euro and yen, continuing its recent recovery march after having slid for the better part of the year.
The weak dollar has helped stocks rally over the past nine months, giving a boost to dollar-traded commodity shares and the stocks of companies that do business overseas. But over the last two weeks, the dollar has churned or moved higher.
The stronger US dollar pressured dollar-traded commodity prices, with gold and oil both sliding.
COMEX gold for February delivery fell $6.30 to settle at $1,119.90 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last week.
US light crude oil for January delivery fell 67 cents to settle at $69.87 a barrel on the New York Mercantile Exchange.
On the economic front, recent reports on retail sales, housing and the labor market have added to evidence that the worst US recession since the 1930s is over. That has raised questions about when the Fed may step in to remove some of the emergency stimulus measures it has unleashed to mitigate the impact from the financial meltdown. With the unemployment rate at 10% and just shy of a 26-year high, the Fed is unlikely to act anytime soon.
The latest central bank rate policy meeting gets under way on Tuesday, concluding on Wednesday. The bankers, led by Chairman Ben Bernanke, are widely expected to hold the federal funds rate, a key overnight bank lending rate, steady at historic lows near zero. What the US central bank says in the policy statement will be of the greatest interest to investors, in particular the possible hints about when it might begin to raise interest rates.
The week ahead also brings reports on housing, the labor market, and consumer and wholesale inflation. The direction of the dollar and the movement in commodities will also remain in focus.
European shares rose on Friday, led by miners as a string of economic reports indicated that China's economic recovery continues to strengthen. The pan-European Dow Jones Stoxx 600 index rose 0.5% to 245.13, extending gains from Thursday. Still, over the week it lost 1.6%.
The UK's FTSE 100 index closed up 0.3% at 5,261.57, the German DAX index climbed 0.8% to 5,756.29 and the French CAC-40 index advanced 0.1% to 3,803.72.
The Nifty ended the week flat after hitting a new 52-week high on Friday. Rising food inflation and IIP numbers, which were below Street expectations restricted gains for the market. For the week, the BSE Sensex ended flat at 17,119 while the NSE Nifty marginally added 0.2% to shut shop at 5,117.
The BSE Sensex hit an intra-week high of 17,352 and low of 16,943 while, the Nifty hit an intra-week high of 5,182 and low of 5,052
On Friday, the BSE Sensex fell 70 points to end at 17,119 after touching a high of 17,351 and a low of 17,056. The index opened at 17,219. The NSE Nifty slipped 17 points to end at 5,117.
In Asia, the Nikkei in Japan was up 2.5%, while Australia's S&P/ASX ended higher by 0.7%. Shanghai SE Composite was down 0.2% and Hang Seng index in Hong Kong was up 1%.
In Europe, stocks were trading in the green. The DAX in Germany was up 1% and the CAC 40 index in France was up 0.8%. The FTSE in the UK was up 1.2%.
Coming back to India, among the BSE sectoral indices, the Banking index was the top loser, shedding 1.3%, followed by the Realty index that was down 1% and the BSE FMCG index was down 1%.
Major gainers were BSE Capital Goods index up 0.5% and BSE Power index up 0.5%.
The BSE Mid-Cap index ended marginally lower by 0.5% while the BSE Small-Cap index was down 0.8%.
Among the 30-components of Sensex, 23 stocks ended in the red and 7 ended in the positive terrain. Bharti Airtel, HDFC, ICICI Bank, SBI and M&M were among the top laggards.
On the other hand, among the major gainers were BHEL, NTPC, ACC and Grasim.
Outside the frontline indices, the big losers in the broader market were OBC, Godrej Ind, REI Agro and GVK Power. On the other hand, gainers included Jain Irrigation, APIL, Bharat Forge and REC Ltd.