Go fly a kite instead

Don't ignore the small things - the kite flies because of its tail. - Hawaiian Proverb.

The festival of kites is here but the Indian stock indices seem to be in no mood to rise, as headwinds seem to be outweighing the tailwinds. Inflation, FII selling, hardening interest rates, tight liquidity, policy stalemate and pressure on external account are among the key pressure points. And, the market is reflecting mounting worries on all these fronts and more. As if the macro-economic concerns were not enough, we received somewhat disappointing numbers from IT major Infosys.



Today the indices might start lower on the back of some cooling in the overseas markets. Volatility is on the rise and calls for ultra-alertness. Near-term prospects are not looking all that bright and be prepared for regular bouts of selling. Upside is limited and the market is expected to face resistance at every rise.

Watch out for the all-important December inflation numbers later today. Expectations are for a reading of 8-8.5%. Good news is that food inflation has snapped a five-week ascent. But, bear in mind that the economic statistics have been quite erratic lately and so guard yourself against any knee-jerk reaction. A 25 bps hike in key policy rates is a given. It remains to be seen whether the RBI announces any fresh steps to ease the liquidity crunch.

Talking of inflation, the Government will import 1,000 metric tons of onions from Pakistan to soften local prices. It has also kept a ban on export of edible oils and lentils to cool prices. The Centre has also announced a few other measures as well, to tackle the inflation problem.

Crude oil and copper declined overnight but thermal coal prices have shot up in the wake of the massive floods in Queensland.

The euro has regained some of the lost ground this week in the wake of the smooth debt auctions in Portugal, Italy and Spain. Assurance from China and Japan on European debt purchases by them has also helped calm the markets a bit.

The dollar index has softened a little bit. The ECB and the Bank of England have left interest rates steady but chances of a rate hike in Europe are increasing as inflation has overshot the official tolerance level.

Infosys may have disappointed markets but IT stocks could still recover after Intel reported its best fourth quarter in history. The chip major’s shares rose after its first-quarter outlook also surpassed estimates.

US jobless claims rose more than estimated and commodity prices dropped.

FIIs were net sellers of Rs 2.49bn in the cash segment on Thursday, according to the provisional NSE data. The domestic institutional institutions were net buyers at Rs 2.42bn. FIIs were net buyers of Rs 5.53bn in the F&O segment. The foreign funds were net sellers of Rs 982mn in the cash segment on Wednesday, according to the SEBI web site.