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Waiting For The Numbers
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With fund flows virtually coming to a standstill amid growing jitters over the fate of Greece and its fallout on the Euro-zone economy, the Indian markets now await the release of September IIP numbers that is expected to be unveiled on coming Friday, 11 November 2011.
The market is eagerly waiting for the winter session of Parliament starting on 22 November 2011. Expectations are high on re-initiating the reforms process.
"Affirmative action from the government on reforms and on investments will be the pre-requisite for the markets to move up sustainably," says Dipen Shah, head of fundamental research at Kotak Securities. He, however, believes that in the coming week the markets will continue to be influenced by the developments in Europe while at home, the inflation and the IIP numbers will be important.
Meanwhile, last week the market remained volatile with the Bombay Stock Exchange (BSE) Sensitive Index (Sensex) moving from positive to negative territory and back following global cues particularly on news from the Euro-zone. For the week ending 4 November 2011, the Sensex fell on low volumes to end at 17,562.61, down 1.4 per cent or 242 points. In the past five trading sessions, the sensex recorded an average daily turnover of Rs 2,248 crore, compared to last six months daily average turnover of Rs 2,615 crore. The mood among investors remained subdued as inflation continued to rise with food inflation jumping to a nine-month high crossing 12 per cent. Last week, petrol prices were also hiked by nearly Rs 2 per litre.
Though the Indian market has discounted most of the bad news, global as well as domestic uncertainty continue to looms over it. Last week too, FII flows remained subdued to the tune of $129 million in the four trading sessions till 3 November 2011.
Last week's rate cut by the European Central Bank by 25 basis points to 1.25 per cent and indication of another stimulus package after the Federal Reserve chairman Ben Bernanke said he was prepared to use monetary tools, may sound good for the markets. The fact is with global economy in a tailspin and indication of mild recession in Europe and slowdown in China, is likely to decrease the risk appetite among investors and flows into emerging markets like India.
With India Inc expected to take another 2-3 quarters to deliver good performance, the next trigger could be an unexpected surprise from the government announcing reforms to boost investments in the country. Though it's a good time to build a portfolio for a long-term, but in the immediate short to medium term, Indian markets are expected to remain subdued and volatile and any bad news will see market drifting down.