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Market bets on forward march

Mumbai, Jan. 3: The bulls are not cavorting on the Street as yet but there’s a warm glow of optimism in the market that stocks will climb higher early in the new year, building on the astonishing 26 per cent gain that the Sensex recorded in 2012.

While the 50-share Nifty of the National Stock Exchange (NSE) has already breached the key psychological level of 6000 and is now trading at 6009.50, market pundits reckon that the BSE benchmark index will also not be left behind.

The Sensex is just 235 points shy of 20,000 — a peak that some experts say will be scaled before January 11 when the IT services giant Infosys announces its third quarter results.

The market draws its lifeblood from a stream of positive news and it has had plenty of it in recent weeks. Fears that the US would tip into a recession have receded after President Barrack Obama and his advisers were able to pull the $15 trillion economy from a fiscal abyss after they drove a bipartisan agreement that nixed the prospect of more taxes and deep spending cuts.

On the home front, investors are betting that the Reserve Bank of India (RBI) — which has behaved like a maverick among global central banks — will cut rates by the end of this month to revive a faltering economy whose growth in the first half of this fiscal slowed to its lowest level in nine years.

But the prospect of a rate cut isn’t the only factor that’s got the market all excited: economists and finance boffins are drawing comfort from a set of discrete data and business surveys that appear to underpin the testosterone-filled bulls’ view of the market.

A survey by Grant Thornton says that the majority of businesses in India are optimistic about the domestic economy and there are hopes for a strong start in 2013. The Grant Thornton International Business Report (IBR) says 71 per cent of businesses in India indicated optimism for their economy, ahead of the global average, which stood at just 4 per cent.

Recent data shows that the country’s manufacturing sector growth registered the fastest pace in six months The HSBC Markit India Manufacturing PMI, which measures factory production stood at 54.7 in December, up from 53.7 in November, indicating a further improvement in the health of the country’s manufacturing sector.

If the manufacturing sector is showing some positive signs, there is a feeling that the forthcoming third quarter results season will not be bad.

Infosys will be the first biggie to declare its numbers and, despite a seasonally tepid period for the IT industry, there are expectations that the Bangalore-based IT services company and its peers are unlikely to disappoint. In fact, shares of Infosys, TCS and Wipro rallied on the stock exchanges today buoyed by hopes that they will report better than expected numbers.

Kishore Ostwal, chairman and managing director, CNI Research, says the Nifty could hit the 6100 mark this month itself and there is a strong possibility that this could happen before January 11. The Sensex — the bellwether of the market — will also scale the 20000 mark around the same time. He, however, adds that thereafter equities will consolidate, awaiting the monetary policy from the central bank due on January 29.

Ostwal points out that though the sentiment is optimistic among investors, it is clearly not euphoric as retail investors are yet to participate.

However, K. Subramanyam, AVP-Institutional Sales, Asit C.Mehta Investment Intermediates Ltd, cautions that the rate cut expectation is also critical as the markets have taken it for almost granted. “If the RBI governor fails to oblige, there will be ferocious selling,” he warns.

Vinay Khattar, head, research (individual clients) at Edelweiss Financial Services, said that the stock markets were on tenterhooks till the US deal was clinched to thwart the fiscal cliff. And with it, the short-term uncertainties have all but evaporated.

Khattar says India is witnessing the formation of a structural bull rally, the seeds for which were sown last year itself. While foreign investors have pumped over $24 billion in domestic stocks last year, he adds that in terms of valuation, India is attractively priced vis--vis other emerging markets.

Although experts differ on the course of the markets post budget (many agree that it will rally in the run-up to the budget), some of the foreign brokerages continue to remain optimistic.

A research report from HSBC today said that the benchmark index was likely to extend the bull- run and touch all time high of 21700 by this year-end. The Sensex had scaled all time high of 21206.77 on January 10, 2008.

Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services is relatively more bullish. He is of the view that the markets could touch an all-time high before March.

 
 
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