Pick the flower when it is ready to be picked.
Friday’s late spurt may have raised hopes of an encore at least on Monday. But, with most global indices flashing the red signs, looks like the Indian market will turn lower again. We expect a slight dip at start and another choppy session. The Nifty February futures in Singapore are pointing to a 40-point fall at the start.
Wait and watch should be the mantra in the near term to overcome the current phase of uncertainty and volatility. Be extremely choosy while picking up stocks at this juncture. You have all the time to closely examine each opportunity. We repeat, do proper due diligence lest you have to pay a heavy price later. For the time being, most stocks look neither ready nor steady for a convincing buy.
The ongoing consolidation though presents an excellent opportunity to revamp one’s portfolio. Get rid of weak stocks and replace them with potential outperformers.
Technically, 4800 remains a critical level. A sustained close below this could spell some more trouble for bulls. The Nifty may fall as low as 4600-4650 if the 4800 barrier is broken decisively. The upside too is capped and resistance is likely at 4900 and 5000.
Among the key factors to look out for going forward will be the borrowing programme for FY11. We expect the FM to return to the path of fiscal discipline in the Budget as he doesn't have much headroom to extend the spending spree. The reported deferment of 3G auction to FY11 is a setback even as fertilizer subsidy is set to swell. The Centre is also likely to announce its stimulus exit in a phased manner in the Budget.
Despite the 75bps hike in CRR, there is no fear of banks raising lending rates anytime soon. That will happen when the RBI hikes the policy rates, which is likely to be after the Budget.
Inflation remains among the biggest risks for India and other emerging markets like China. For the advanced economies, the major worry is to sustain the growth. So, policymakers in these regions will refrain from a hasty retreat from stimulus.
FIIs were net sellers in the cash segment on Friday at Rs9.96bn on a provisional basis. The local funds were net buyers of Rs10.11bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net buyers at Rs4.9bn.
US stocks declined on Friday, capping the worst month for Wall Street since Feb. 2009. Concerns over the outlook for technology earnings overshadowed data showing fastest GDP growth in six years. Crude oil prices slid for a fourth successive day.
The technology-heavy Nasdaq composite index led the decline, as investors bet that the strong economic growth of the fourth quarter can not be sustained.
The Dow Jones Industrial Average lost 53 points, or 0.5%, to 10,067.33. The S&P 500 index shed 11 points, or 1%, to 1,073.87. The Nasdaq fell 31 points, or 1.5%, to 2,147.35.
The Dow and S&P 500 closed at the lowest point since Dec. 6 and the Nasdaq at the lowest point since Nov. 30.
Technology and commodity shares led the declines for the second session in a row, following Thursday's big selloff.
Stocks rallied through Friday morning as the stronger-than-expected GDP report seemed to soothe some of the market's recent worries. Better-than-expected readings on consumer sentiment and manufacturing also gave stocks an initial fillip.
But the worries of the last two weeks resurfaced as the session progressed. Last week's selloff was sparked by concerns about China's plan to curtail reckless bank lending and the Obama administration's plan to restrict trading by big banks.
Although technology led the way Friday's selloff was fairly broad based. Intel, Microsoft, IBM, Apple and Hewlett-Packard were among the big decliners.
Treasury prices rose in a classic bid-to-safety move and the dollar firmed up versus other major currencies. The VIX, Wall Street's so-called fear gauge, climbed 3.8% as the stock selloff took hold.
Gross Domestic Product (GDP), the broadest measure of the economy, grew at a 5.7% annual rate in the fourth quarter, better than forecast and more than double the pace it grew in the third quarter. Economists thought GDP would grow between 4.5% to 5.5% after expanding by 2.2% in the previous quarter.
In the day's other economic news, the consumer sentiment index from the University of Michigan rose to 74.4 from 72.8 previously. Economists had forecast a reading of 73.
The Chicago PMI, a regional reading on manufacturing, rose to 61.5 from 58.7 previously. Economists thought it would fall to 57.2.
President Barack Obama was set to unveil a US$33bn package of tax credits later on Friday aimed at sparking more job growth. The plan includes providing a US$5,000 tax credit for each net new employee a business hires.
Dow component Microsoft reported higher quarterly sales and earnings that beat estimates, thanks to strong sales of Windows 7, the company's newest operating system. Nonetheless, shares fell 4% in the big tech selloff.
Amazon.com reported higher quarterly sales and earnings that topped estimates. Shares fell 1% on Friday.
With 220 companies, or 44% of the S&P 500 having already reported results, earnings are on track to have grown 206% from a year earlier, according to the latest estimates from earnings tracker Thomson Reuters. Revenue is on track to have grown 7% versus a year earlier.
The dollar gained versus the euro and the yen.
COMEX gold for February delivery fell 60 cents to US$1,083 an ounce. Gold closed at an all-time high of US$1,218.30 an ounce last month.
US light crude oil for February delivery fell 75 cents to US$72.89 a barrel on the New York Mercantile Exchange.
Treasury prices rallied, lowering the yield on the 10-year note to 3.61% from 3.64% late on Thursday.
For the month of January, the Dow lost 3.5%, its biggest monthly loss since Feb. 2009, when it fell 11.7%. The S&P 500 lost 3.7%, its biggest monthly loss since Feb. 2009, when it lost 11%. The Nasdaq lost 5.4%, for its biggest monthly loss since Feb. 2009, when it gave up 6.7%.
According to the Stock Trader's Almanac, as January goes, so goes the year. More specifically, as the S&P 500 goes, so goes the year. Since 1950, all the declines in Januarys were followed by a new or continuing bear market, a 10% correction or a flat market, meaning less than 5% fall or gain. However, the indicator is not all that accurate. For example, in 2003, the S&P lost 2.7% but still ended the year up 26.4%.
European shares ended January on a positive note on Friday, as strong results from Infineon Technologies and BMW coupled with encouraging US economic reports helped bolster the sentiment. Receding concerns about Greece's fiscal outlook also contributed to the gains.
The pan-European Dow Jones Stoxx 600 index rose 1% to 246.96, paring losses for the month and year to 2.7%.
The German DAX index climbed 1.2% to 5,608.79, while the French CAC-40 index advanced 1.4% to 3,739.46 while the UK's FTSE 100 index rose 0.8% to 5,188.52.
Sensex erases losses…Nifty ends above 4850
The BSE Sensex advanced 51 points to end at 16,357 after touching a high of 16,390 and a low of 15,982. The Nifty gained 15 points to end at 4,882.
Equity markets in Asia ended in the red. The Nikkei in Japan was down 2%, while Australia's S&P/ASX ended lower by 2.2%. The Shanghai SE Composite ended flat and Hang Seng index in Hong Kong was down 1.2%.
In Europe, stocks were trading positive. The DAX in Germany was up 0.8% and the CAC 40 index in France was up 0.7. The FTSE in the UK was up 0.6%.
Coming back to India, the BSE Banking index was the top gainer, adding 3%, followed by the Realty index that was up 2.6% and the BSE Capital Goods index was up 1.2%. The BSE Mid-Cap index gained 1.1% while BSE Small-Cap index was up 1%.
Among the losers were BSE FMCG index down 1.8% and Metal index down 1.5%.
Among the 30-components of Sensex 17 ended in the negative terrain and 13 ended in the green. ICICI Bank, BHEL, DLF, Sun Pharma and SBI ended in the positive terrain. Among the top gainers were, Hindustan Unilever, Wipro, Tata Motors, Tata Steel and Bharti Airtel.
Outside the frontline indices, the big gainers in the broader market were Piramal Healthcare, IFCI, RCF, UCO Bank and Century Textile. On the other hand, losers included Opto Circuit, Jain Irrigation, Madras Cement and Gujarat NRE Coke.