Election results to drive stock markets this week

Markets this week would be driven by political news and exit polls.

Exit polls would start rolling in from Wednesday evening and this would drive markets on Thursday and Friday before the actual results on Sunday. Exit polls could influence market movement this next week in the range of four- to-six per cent in either direction.

Markets rallied last week, particularly on Friday, anticipating that the Bharatiya Janata Party would improve its 2008 tally in four of the five states significantly.

The stock market is rooting for the Opposition and it is reflected in its current state. Besides, auto companies will be in focus amid release of monthly sales volume data for November. Trend in investment by foreign institutional investors ( FIIS), global cues and movement of rupee will be key drivers for the stock market in near- term.

News last week was a mixed bag. While GDP for the second quarter at 4.8 per cent was significantly better than expected, the contribution from agriculture was more than significant.

We have had an excellent monsoon this year and this was a major contributor to the improvement in GDP. What in worrisome is the poor state of the manufacturing sector, which could weigh on the Reserve Bank of India when it announce the monetary policy later this month. In the first seven months of the calendar year, the government has already reached 84 per cent of the budgeted deficit. If a simple mathematical calculation is to be done, this would take us to 144 per cent of the Budgeted deficit.

Diesel prices were raised by the customary 50 paisa on Saturday midnight. Though the oil minister maintains that diesel would be deregulated in the next six months, one fails to understand how the price could be hiked by Rs10 without steep increases.

In international news, the Dow Jones index was almost flat gaining a mere 17 points, or 0.10 per cent, to close at 16,086. The debate on when easing or tapering of US Federal Reserve stimulus will begin continues to haunt global markets.

FIIs were buyers of equity worth Rs  1,320 crore while domestic institutions for a change also bought equity worth Rs  496 crore. The follow- on public offer from Power Grid will open and close this week with the price band fixed in the range of Rs  85- Rs  90 and a discount of Rs  4.5 for retail and employees. The issue would raise between Rs  6,700 crore and Rs  7,100 crore.

The issue is primarily a fresh one with the government selling roughly 23 per cent of the total issue. The stock closed at Rs  95 on Friday and is attractively priced.

The November expiry was a quiet affair with a month- on- month loss of 72 points, or 1.17 per cent on the Nifty. Key levels for the Sensex this week are 20,155 and 21,025, and 5,975 and 6,245 for the NIFTY. Brace yourselves for a political rally next week.

The writer is an investment analyst

Courtesy: Mail Today