2013 expected to be very critical for stocks markets

There is just one trading day left this year, which has been decent for markets with gains of 25.8 per cent on the BSE Sensex so far. This wipes out almost all the loss made in the calendar year 2011. Similarly, the Nifty gained 27.7 per cent. The year ahead is expected to be very critical for markets and would have a lot at stake.

Domestic investors will track the US fiscal cliff dialogue hoping that American lawmakers find a solution to prevent $600 billionplus in tax hikes and spending cuts in January.

Besides, auto and cement stocks will be closely watched as companies are expected to unveil monthly sales starting Tuesday. These two factors will cause volatility in the market.

The United Progressive Alliance-II will present its last full Budget irrespective of when elections are held as the Budget in February 2014 would be a vote-onaccount. In such a scenario, the government will focus on introducing measures which would attract votes. These initiatives are likely to be detrimental to the buoyancy of the market.

This postbudget view is, however, different from the pre-Budget view. A month in which there are five Tuesdays is generally helpful for the market and January 2012 was one such month.

The Sensex gained 1,738 points during the month of which 1,622 points were gained on the five Tuesdays. Similarly, Nifty gained 521 points, or 90.75 per cent, of the 575 points attained in January. January 2013 begins with a Tuesday and would have five trading Tuesdays.

Foreign institutional investors continued to pour money into the bourses and invested Rs 5,660 crore. Domestic institutions sold shares worth Rs 936 crore. Markets are expected to have a fiery start in the new calendar year. It makes sense to trade on the long side and keep the level of 19,650 on the Sensex and 5,950 on the Nifty as key resistance levels.

(The writer is an investment analyst)