Early morning cheerfulness can be extremely obnoxious. - William Feather.
Two big weekend developments could have a bearing on the market sentiment in the near term. The first one is the Government’s announcement that IRDA will continue to oversee ULIPs. This might set at rest long-standing anxiety over the ULIP issue and could revive the sale of the hybrid product. So, keep an eye on the flows from the domestic funds. FII inflows have improved in June after the May carnage.
The second one is China’s decision to pursue a more flexible currency policy. Asian markets are up smartly in reaction to the Chinese announcement. The dollar and euro have gained versus the yuan. But, one needs to be a little careful amid some ambiguity over China’s proposed currency reform.
We expect a higher opening for the Indian markets. The big question is whether the rally has legs to traverse further distance. The F&O expiry will make things somewhat volatile. If the NSE Nifty manages to sustain above 5300, there could be some comfort. However, selling pressure is not ruled out around 5300 levels.
FIIs were net buyers of Rs7.79bn bn in the cash segment on Friday on a provisional basis, according to the NSE data. The local institutions were net sellers at nearly Rs5bn on the same day. In the F&O segment, the foreign funds were net buyers of Rs1.28bn. On Thursday, FIIs were net buyers of Rs5.44bn in the cash segment, as per SEBI data. Mutual Funds were net sellers at Rs2.93bn in the cash segment on the same day.
US stocks ended slightly higher on Friday at the end of another choppy session, as remarks from Caterpillar bolstered investors' confidence in Asia's economy, though lingering worries about European debt problems kept the advance in check.
The Dow Jones Industrial Average added 16 points or 0.2% at 10,450.64, while the S&P 500 index ended virtually unchanged at 1,118 and the Nasdaq Composite index too finished nearly static at 2,310.
The Dow gained 2.3% last week, while the S&P rose 2.4% and the Nasdaq was up 3%. With this, Wall Street registered a second consecutive week of gains.
Health-care sector weighed on the broad S&P 500 index, although the energy and materials sectors climbed.
Friday was also a "quadruple witching" day, with stock-index futures, stock-index options, stock options and single-stock futures expiring, prompting investors and traders to readjust their positions.
The expirations sometimes lead to increased volume and volatility. However, the CBOE Market Volatility Index fell 5% to 23.80, while volume was below the 2010 daily average. Composite activity in New York Stock Exchange-listed companies hit 4.9 billion shares.
COMEX gold for August delivery closed up $9.60 at a record high of $1258.30. Gold hit a trading record of $1,263.70 during the session.
The euro was barely changed versus the dollar, which fell 0.4% against the yen. The euro posted its strongest weekly gain since September, solidly above its 10-year moving average after successful euro-zone debt auctions eased some investor anxiety.
Several events last week, including a successful offering of Spanish debt, helped bolster investor confidence. But Europe's financial health is still suspect and the global market players are keeping a close eye on every development.
US light crude oil for July delivery rose 39 cents to settle at $77.18 a barrel on the New York Mercantile Exchange.
Treasury prices tumbled, raising the yield on the 10-year note to 3.22% from 3.19% late on Thursday.
Caterpillar was among the Dow's top performers, up 1.4%, after the industrial giant posted a 38% year-over-year jump in machine sales in Asia for May. However, the Caterpillar report wasn't as upbeat about Europe.
US stocks were subdued amid a lack of market-moving corporate or economic news and the fact that it was a Friday before a summer weekend. The direction over the short term is likely to stay volatile and any gains in the weeks ahead are likely to be tepid amid ongoing questions about both Europe and the US economy.
The week ahead brings reports on housing, jobs and the latest policy meeting from the Federal Reserve.
US socks managed to rise on Thursday in which tepid reports on jobs and manufacturing vied with positive news out of Europe, where an auction of Spanish bonds saw strong demand.
On Friday, European officials said that Greece was moving forward in its efforts to cut its deficit. Separately, officials said they would release results of bank "stress tests," much as the US did in the aftermath of the bank crisis.
Shares of BP ended little changed, erasing morning gains. Investors weighed news that Moody's has downgraded its debt by three notches, but still kept it at investment grade. Ratings agency Standard & Poor's cut BP's debt on Thursday as the British oil firm continues to struggle in the aftermath of the Gulf spill.
On Thursday, BP's CEO Tony Hayward was grilled by US lawmakers who lambasted him for being oblivious to the risks that led to the spill and for not cooperating fully with investigators in its aftermath.
Earlier last week, BP said it was canceling its quarterly dividend and agreed with President Obama's request that it establish a $20 billion fund to cover Gulf damages.
European shares ended higher on Friday, as strength in banks offset losses in major pharmaceuticals. The Stoxx Europe 600 index closed up 0.2% at 255.50, marking the eighth day of gains for the index.
The French CAC-40 index ended up 0.1% at 3,687.21. The German DAX index ended down slightly at 6216.98. The UK's FTSE 100 index fell 0.05% to end at 5250.84.
Worries about sovereign debt in Europe have retreated and European Council President Herman Van Rompuy said late Thursday that stress tests on European banks will be published in July.