Stock markets close flat; inflation, IIP data to dictate movement next week

India's stock markets did not do much during the week. The NSE Nifty ended at 8,337, up 15 points from last week's close, while the Sensex rose three points to end the week at 27,869. The Sensex touched an all-time high of 28,010 on November 5; but it ended the day below the 28,000 level.

However, the S&P BSE Midcap index rose 1.68% while the S&P BSE Small Cap index gained 1.70% during the week.

The markets were closed for two days on the occasion of Muharram and Guru Nanak Jayanti.

Experts expect some consolidation in the near term. They say that any movement from here will depend on index for industrial production (IIP) and WPI and CPI numbers to be released next week.  

Vivek Gupta, CMT (Director Research), CapitalVia Global Research, says, "Movement of the index in the near term will depend on IIP, CPI & WPI data expected to be announced later in the week, besides the second-quarter results of big companies."

Rajesh Iyer, head of investment advisory services and family office at Kotak Wealth Management, says, "Economic parameters are still to show any meaningful improvement. Lead indicators are showing a mixed trend. Current account and fiscal deficits are turning more positive and inflation is subsiding fast. However, credit offtake, IIP and investment cycle are still showing weakness."

"Re-rating of equities has already happened as the forward PE has moved up from 13x to 16.5x. From here we expect equity returns to equal earnings growth, which is expected in the range of 15-18%. Equity valuations will remain at elevated levels because of strong inflows from both FIIs and domestic investors. Superior returns given by equities over other asset classes will also lead to a rise in inflows into equities."

Vinod Nair, head, fundamental research, Geojit BNP Paribas Financial Services, says, "We are consolidating at market highs as we have moved very fast from the low of 7,750, led by spurt in FII inflows and quantitative easing in Japan. The market is in a sensitive range and expects the RBI to lower interest rates in the near term. It will anxiously wait for CPI numbers for October which will be released on November 12. The data will decide the momentum going forward."

FIIs poured in Rs 4,411.93 crore during the week. Among sector indices, S&P BSE Realty was the biggest gainer (5.72%). It was followed by S&P BSE Healthcare and S&P BSE Bankex with gains of 3.69% and 1.79% respectively. The biggest loser was S&P BSE Metals (4.34%).

S&P BSE Power was the second-worst performing index (1.49%). Among BSE 100 companies, majority of banks and financial services sector stocks touched their all-time highs.