Markets may remain flat

However, positive outcome from US President’s Republic Day visit may send markets up this week

The BSE Sensex jumped by a whopping 1157 points last week. Prior to closing at 29279 for the first time ever, the benchmark index scaled to a life-time high of 29409, driven primarily by positive global cues and also huge buying support from foreign institutional investors (FIIs). Since the advance was based mainly on foreign funds, the market breadth still remained in favour of sellers as a majority of shares sans FIIs' support quoted lower their previous week's closings.

The Reserve Bank of India provided the first trigger for the latest spark in the market by suddenly and unexpectedly cutting interest rate by 25 basis points on Thursday of the previous week and thereby sent the markets up.

However, since it was the only trigger available at that point in time and the news from the foreign countries, especially from China remaining negative, the markets were expected to turn weak in the week that was. But, then it turned out to be otherwise as the news from foreign countries started to turn positive. The Chinese government announced a scheme that was aimed at reviving its ailing economy. A report by the World Bank, however, praised the growth of the Indian economy and predicted that it would surpass that of China's in the year 2016 itself. A pat from Nomura Securities for the Indian economy and its prediction for the Sensex that it could scale to 33,000 in the 2015 also came as a big boost to the market sentiments. Lastly, the European Central Bank (ECB) announced a huge stimulus programme to prevent the Eurozone nations from sinking further into deep recession.

Accordingly, the central bank would pump over one trillion Euros to stave off the deflation threat. The bank would start bond buying from March, 2015, which would continue till September, 2016.

Global stock markets cheered the ECB stimulus with European markets like France's CAC and Germany's DAX rising over a per cent on the last trading day of the last week. The Asian markets also closed higher with Japan rising to a near three week high. Hong Kong stocks also rose by more one per cent. The Indian stock markets also followed global trends as the FIIs were net buyers of equities on every day of the last week. The world crude oil market which had been heading southwards since long also firmed up, of late. Aided by such positive news and developments, the BSE Sensex jumped up above 29000 mark for the first time and was short only 600 points from the next coveted number of 30,000 mark, when it reached the week's peak of 29409 on Friday. Even at its closing of 29279, the Sensex is just 750 points away from this magic number. Since, the markets on Friday jumped up with a bullish gap on daily chart of the BSE Sensex, it is unlikely to fall below the bottom of the last day of trading except for some untoward incident or development. The markets will remain officially closed on Monday on account of the Republic Day and has the last day of futures and options contract falling on Thursday, so it could be a dull volume all-throughout the week.

At the same time, market operators would be eager to know the outcome of the President Barack Obama's India visit from Sunday till Tuesday and if it turns out to be positive, then a likely jump in the new week itself could send the Sensex above 30,000. If the RBI also comes out with a further rate cut in its ensuing monetary policy review meeting on February 3, then even Nomura Securities' prediction of the Sensex scaling to over 33,000 can translate into a reality in the next few months.

However, prospective investors are warned against rushing for buying of equities merely on such bullish predictions as they are based on long-term perspective and also prone to go wrong the way it happened in the past many times. The investors who really wish to gain from the stock markets must restrict their shopping list and buy only good quality stocks that have the inherent strength of standing firm against even the worst in the economy.

By: Talakshi Gosar