Weekly Newsletter - Dec 25 2010

Though the key indices gained 1% during the week, one should not read too much into it as the tepid rise came amid thin volumes. Most investors have virtually taken a backseat for December and are looking forward to 2011. The same is the case with most global markets, although they still have managed to post decent gains in the year-end rally. The Indian market has underperformed its global counterparts of late, as a spate of controversies and the political stalemate in parliament have kept investors at bay. Part of the recent fall could also be attributed to the year-end fatigue on the part of the FIIs.



The remaining sessions next week might also be rangebound and dull although the F&O expiry will make things a little bit more interesting. No major events are lined up for next week barring a few global economic statistics. Back home, inflation has once again reared its ugly head. It will continue to be a major headline risk for markets and challenge for policymakers. So, keep an eye on Government measures to cool down food inflation, which has surged to 12%. In this context, weekly WPI inflation data on Dec. 30 will be watched keenly. The RBI will come out with the latest data on the country's Balance of Payment (BOP) and current account deficit.

In a nutshell, trading will stay thin and listless. Individual stocks could see some action based on the news flow but the main indices are unlikely to witness any material progress. January will be interesting as markets react to the latest report card from India Inc. and the RBI quarterly review. A whole host of fresh economic data points from around the globe should also be watched carefully. How the overseas investors behave early next year will have a bearing on the sentiment. At the same time, one should not overlook the political factor either. Budget will be a major event, especially given the ongoing tussle between the Government and the Opposition.