Inflation, Q3 results to set market trend this week

The week will test the market. Inflation numbers, due on the first trading day of the week, would set the market trend because expectations for a rate cut when the Reserve Bank of India meets on January 29 for monetary policy review would be formed accordingly.

Besides, third quarter earnings of giants like Tata Consultancy Services (TCS), Reliance Industries and Wipro will also determine the market's course. TCS will announces results on Monday, Bajaj Auto Wednesday and Wipro Friday.

There was some momentum and optimism building up but the same seems lost in trading last week. The MIDCAP and SMALLCAP indices were bigger losers with loss in excess of two per cent. There was a SMALLCAP company Arshiya International- into the business of logistics- which was in the news for the wrong reason. The share price was locked at down circuit on the last three days of the week ever since a large number of employees were sacked and salaries not paid. The share lost almost 44 per cent in the three days.

The management did try to diffuse the situation but there was no respite. Allegations of wrong doing, fudging of accounts and overleveraging are among the things that the company management has been accused of.

What is worrying is the high level of debt, which is in the region of Rs 2,500 crore for a company with a market cap of just about Rs 413 crore. The management infused Rs 42 crore on Friday towards outstanding warrants issued to the promoters but the market seemed unrelenting.

Election in three North East states will be held in the last fortnight of February and window for the government to announce reform measures is almost over.

The finance minister will be in a road show meeting foreign institutional investors (FIIs) in Hong Kong and Singapore on January 21 and 22. He is expected to assure them of continuing reforms and address concerns about credit rating outlook downgrade.

The single-biggest driver continues to be FIIs, who invested Rs 3,850 crore. Domestic institutions sold shares worth Rs 1,800 crore during the week. The highlight of trading was the repeated attempt of market to open positive with upward gaps but failure to sustain the same. Markets lost ground on Friday and but for Infosys, the fall would have been significantly pronounced.

The Railways hiked passenger fares across the board, including the general and the second class, after 10 years while AC and first class fares were hiked for the fourth time in less than a year. This gave credence to an expected petro product price hike particularly diesel, which did not materialise and caused markets to lose ground.

Industrial output for November 2012 was down -0.01 compared to a relatively higher base of six per cent last year. The saving grace of the week was much better-than-expected results from IT major Infosys, which gained a significant 16.90 per cent to close at Rs 2,712.60 on the Bombay Stock Exchange.

The share needs to close above Rs 2,750 and sustain. This would fill the downward gap which the share made post the January-March quarter results in April 2012. If this were to happen, then the share is likely to reverse its nine-month weakness.

Key levels for the week in a tough environment are 19,850 and 19,550 on the Sensex and 6,050 and 5,850 on the Nifty.

(The writer is an investment analyst)

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