Market To Remain Range Bound

After good appreciation in the markets over expectation of reform push during the winter session, the markets seem to be taking profit booking from the blue chip companies. Further, the global cues are also making investors to sell front-runner stocks in last couple of weeks. The Chinese market showed some profit booking after a good rally on unexpected policy rate cut. This was first time in last two year when rate were reduced. The profit booking does not mean the loss of investors’ confidence in the Indian markets. Rather, the investors seem to putting more faith on the Indian economy and shifting their focus on more risky assets like mid cap and small cap stocks during the last fortnight.

The domestic market barometers BSE Sensex and NSE Nifty showed a correction of 1.96 per cent and 1.42 per cent respectively in last fortnight ending December 10, 2014 and closed just below the psychological levels of 28000 and 8500 respectively. Interestingly, the foreign institutional investors (FIIs) remained net buyer on every trading session. This very fact showed that FIIs have started increasing their risk appetite in domestic markets and seem to be buying mid cap and small cap companies. This resulted into 1.79 and 1.18 per cent gains in mid cap and small cap indices respectively. The domestic market seems to be in the consolidation mode and the nifty seems to be trading in the range of 8300 to 8600 till this month’s expiry, as indicated by F&O data.

On global front too, the major markets showed some profit booking during last couple of weeks. The Chinese market showed 2.44 per cent correction after a good rally over unexpected rate cut after more than two year. However, the mood in Chinese market is at the peak level which is clearly seen from the record openings of new trading account. However, some pain seems to be emerging in the European zone. The short term yield in Greece started rising above the long term yields due to the next week’s presidential election high-lightened concerns over the country’s near term political, financial and economic future. The very fact is indicating the country going again in the recession. On contrary, the Wall Street seems to be keeping eye on the FOMC meeting on 16-17 December. The strong jobs data and inflation too below US Fed’s target of 2 per cent suggest improving in the economy. However, FOMC is expected to continue its stimulus by sticking to interest rate near to zero level.

On domestic front, the investors are little worried about the government as there were no significant positives news coming from the current winter session and got disturbing about the pace of reform agenda. On disinvestment front too, the government is able to raise upto Rs 1700 crore from SAIL divestments and many more are to hit the capital market. There has been good interest coming in the domestic equity markets over last six months, however, on the ground reality, the actual money in not flowing in infrastructure or expansion projects seizing cash flows across the country. We have been repeatedly mentioning that its reform and not interest rate cut to create a sustainable growth in the economy. We expect market to trade in a range till budget session unless there are major fundamental changes in the economy.