Infosys, IIP and inflation– let the action begin!

Don't tell me how hard you work. Tell me how much you get done. - James Ling.

Markets took a breather after Tuesday’s stellar rally as investors appeared reluctant to commit ahead of the IIP data and Infosys results. The IT major is likely to deliver strong Q3 numbers, partly helped by the Rupee’s steep fall. Investors and analysts will tune into commentary from Infosys honchos for better understanding of the outlook for the coming few quarters. Watch out for Infosys’ revised FY12 guidance.

The start is likely to be quiet at best due to indecisive global cues. While the morning may belong to Infosys, the afternoon will see the markets react to IIP for November. It is expected to rebound from a disastrous October reading. One has to see if there is any upward revision of the October print of -5.1%. Weekly food inflation is also due today. It is likely to stay in the negative zone, mostly owing to the statistical phenomenon called ‘base effect’. more important will be the inflation report for December, which is due on Monday.



In the overseas markets, the main event will be the policy meetings of the Bank of England and the ECB. Italy and Spain are scheduled to tap the debt markets as well.

The trading activity for the NSE Nifty narrowed down between 4840 and 4880 but renewed buying momentum was seen in mid-cap and small-cap stocks. The neckline for ascending triangle breakout is placed at 4795 and that would in turn act as a stop loss for the current uptrend.

Take extra care and precautions while trading in the risky Small-Cap and Mid-Cap counters. The ongoing ascent in the broader market may not be sustainable.

Germany's economy is likely to have contracted a wee bit in the fourth quarter of 2011, putting the euro area's largest member at risk of a mild recession.

The yield on 10-year German government bonds eased after a fresh debt sale, which was covered 2.8 times. The yield on Italy's 10-year benchmark is hovering close to the danger mark of 7%. The Spanish 10-year bond yield was down slightly at 5.3%.

Most economists expect the ECB to maintain rates on hold on Thursday, but it is expected to take further action in the coming months.

The euro slid as much as 0.8% to a 16-month low around $1.26 after a top official at rating agency Fitch reportedly called upon the ECB to step up bond buying in order to save Italy and prevent a "cataclysmic" euro collapse.

Meanwhile, Chinese inflation cooled slightly in December with the benchmark consumer price inflation (CPI) rising by 4.1% vs. 4.2% in November. China's December producer prices were up 1.7% vs. year ago.

Crude oil futures in New York declined on Wednesday due to a stronger dollar and a surprise increase in American inventories. Natural-gas futures traded at the lowest in two years on expectations of warmer weather in coming days and ongoing production growth.

Economic conditions across 12 US districts continued to expand moderately from November to December, according to the latest edition of the Federal Reserve's Beige Book.

The Fed said that retailers reported strong holiday sales in December, but the residential real estate market was down in all districts.

The FIIs were net buyers of Rs 4.31bn in the cash segment on Wednesday, as per the provisional figures released by the NSE. The domestic institutional investors (DIIs) were net sellers at Rs 1.82bn.

The FIIs were net buyers of Rs 4.96bn in the F&O segment on Wednesday, according to the provisional NSE data.

The foreign funds were net buyers of Rs 4.05bn in the cash segment on Tuesday, the SEBI data shows. Mutual funds were net buyers at Rs 673mn in the cash segment on the same day.

Global Data Watch: Germany CPI, UK industrial production, EU industrial production, BoE interest rate decision, ECB policy meeting, ECB President Draghi's Speech, US weekly jobless claims, US retail sales and US business inventories.

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