Year-end profit taking may cap upside

With key economic data due in the US, Indian stocks will take cue from global cues at the onset of the trading next week. The US government will release the data on US non-farm payroll for November 2010 on Friday, 3 December 2010. The non-farm payrolls number is forecast to increase by 144,000 in November from October, when it climbed by 151,000. The jobless rate, meanwhile, may stand unchanged at 9.6%, as per economists' expectations. A strong US jobs report may lead investors to expect that the Federal Reserve could scale back its latest quantitative easing measures.



Closer home, a nation-wide truckers' strike from 5 December night could weigh on the market as the strike may create logistics problems for Indian firms. The All-India Motor Transport Congress has given a call for a strike demanding that the central government reduce the toll tax on the national highways.

Year-end profit taking may cap the upside on the domestic bourses in the near term. Funds based in US and Europe follow calendar year as their accounting year. Foreign funds have made heavy purchases of Indian stocks this year. FII inflow in the calendar year 2010 totaled Rs 132853.41 crore so far (till 1 December 2010). In dollar terms, the net equity inflow in 2010 now stands at $29.26 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.

The next major trigger for the market is the advance tax payment of corporates for the third installment, which falls due on 15 December 2010. The advance tax figures will provide a cue on Q3 December 2010 corporate earnings.

The government will unveil industrial production data for October 2010 on Friday, 10 November 2010. The volatile industrial output growth slowed unexpectedly in September 2010 to 4.4%, led by a decline in capital goods production.

With economic growth remaining strong and the wholesale price inflation expected to fall due to base effect, the Reserve Bank of India (RBI) is seen keeping policy rates unchanged at a mid-quarter monetary policy review on 16 December 2010. The Reserve Bank of India raised its short-term borrowing and lending rates by 25 basis points each in early November 2010, raising rates for the sixth time this year.