Tuesday, December 27, 2011

Equities likely to stay volatile, gold weak

It was a mix of sentiments on Dalal Street last week. The large-cap stocks saw some recovery as investors preferred to pick up beaten-down stocks. BSE Sensex - a representative index of large-cap stocks - moved up 1.6% to close at 1,5738. However, shares of mid- and small-cap companies continued the downward journey.

BSE Mid cap and BSE Small cap indices lost 1.74% and 1.29%, respectively, over the last one week. Among the sectoral indices, BSE Capital Goods index emerged as the worst performer with a loss of 3.18%. BSE Oil index gained the most (3.26%) over the last one week and emerged as the best performing sectoral index followed by BSE FMCG index with 3.2% gains.

Global credit rating agency Moody's on Wednesday upgraded the credit rating of Indian government's bonds from speculative to investment grade, infusing confidence among the investing community. Strength in global markets further supported Indian stocks as a result.

Stocks of large companies were accumulated by traders. However, investors have to bear with high volatility as markets move closer to expiry of December month series of derivatives due on Thursday.

"Nifty may see a rally of approximately 100 points. 4,675 should act as a support and 4,900 will be the resistance in the short-term," says K Subramanyam, AVP, institutional sales, Asit C. Mehta Investment Intermediates. FMCG stocks may see some profit taking given the handsome gains they have registered last week.

Stocks of capital goods companies are expected to continue their downward journey as analysts expect weak quarterly numbers. Analysts will wait for auto companies to announce monthly sales numbers before estimating the quarterly numbers.

FIXED INCOME
Expectations of benign inflation has pushed the bond yields down. Though the liquidity situation is yet to improve and the government is expected not to deliver on fiscal deficit targets, bond prices have inched up marginally.

"The 10-year benchmark yield is expected to remain in a narrow range of 8.25% to 8.5% in the short term," says Ganty Murthy, head, fixed income at Peerless Mutual Fund. Investors can consider investing in income funds, as RBI should cut rates towards the end of first quarter of CY 2012.

GOLD
Gold inched up marginally to close at 27,590 per 10 grams. Prices may show some weakness amidst a revival of hope in global markets. In medium-term, however, the yellow metal should show strength as a protector of value when the fiat currencies lose value.
Source: http://economictimes.indiatimes.com/markets/analysis/equities-likely-to-stay-volatile-gold-weak/articleshow/11247884.cms

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