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Wait & watch at first day, first show

Mumbai, Jan. 1: The new year began on an uninspiring note at the stock markets with the key indices ending marginally in the red today.

Experts contended that factors such as the upcoming quarterly results, inflation numbers, the progress of the Fed’s tapering and the big event of the general elections would shape stock movements this calendar year.

For the short-term, investors are focussed on the earnings season that will start in around two weeks apart from the monetary policy that will be announced by the Reserve Bank of India later this month.

It is largely felt that while few industries dependent on domestic demand may see continued pressure on their margins, export-oriented sectors such as IT services may perform well during the third quarter ended December 31.

Analysts said the focus would also be on inflation.

At the mid-quarter review of monetary policy, RBI governor Raghuram Rajan, who had surprisingly left key rates untouched, had pointed out that he would wait for inflation reading for one more month before taking a call on interest rates.

Many in the markets are of the view that stubborn food inflation could be on its way down; if it inches lower, it will mean that interest rates have topped out. There is a growing expectation that the current calendar may also see a reduction in interest rates if inflation falls to a level that offers comfort to the central bank.

“The change in the government and consequent changes in policies, will result in inflation sharply coming down and the rate cycle reversal will start. This will in turn push new investments which will be aided by higher capacity utilisation. The whole cycle will reverse very soon,” says an optimistic Kishor P. Ostwal, CMD, CNI Research. Ostwal does not rule out the possibility of the Nifty touching 7000-7200 level this year.

Analysts said with the Fed tapering expected to be a gradual process, a sharp reversal in FII inflows was unlikely. Despite various macro-economic challenges faced by India during 2013, the foreign investors invested around $20 billion in equities.

The Sensex today opened higher and climbed to 21244.35 before ending at 21140.48, a loss of 30.20 points, or 0.14 per cent. The broader, 50-share CNX Nifty on the National Stock Exchange was down 2.35 points to 6301.65.

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