Weekly Newsletter - Dec 5 2010

After a fairly strong week, the market gave up some of the gains, with the broader market taking a beating after SEBI banned the promoters of four companies for alleged price manipulation. So, looks like the overhang of scams will continue to haunt the Indian market just as everything seemed to fall in place. Another factor that could affect the sentiment early on Monday is a weaker than expected US jobs data for November. The world's largest economy managed to add just 39,000 non-farm payrolls versus expectations of 150,000. What's worse, the unemployment rate climbed to 9.8% as against expectations of 9.6%. Still, much will hinge on how Wall Street and the European markets react to the jobs report.



On the whole, we expect the market to consolidate after this week's 4% rally. Next week is very light in terms of big, market moving events. Very few important global economic data points are scheduled for next week. In India, the IIP for October will be released on Dec. 10. Since the infrastructure sector growth showed a sharp recovery in October, it is possible that the IIP data will also exhibit a similar turnaround after a dismal September. All the more reason for the market to turn choppy and rangebound before in the run up to the IIP report. We would urge a little caution, especially in the non-index counters after Friday's steep losses in the Small- and Mid-Cap stocks. At the same time, the bias remains cautiously positive.