Global cues may dampen sentiment

Equity indices are expected to remain subdued this week as global factors remain a cause for concern. Fears of stricter regulations on financial entities in the US coupled with high commodity prices and tightening of interest rates in China are likely to put downward pressure on the stock price. Market participants are also wary of the liquidity scenario with foreign institutional investors (FIIs)on a selling spree. And with the central bank policy review nearing, most large investors are taking a cautious stand.

“Nifty may fall to 4,900 levels while the upside is limited to 50 to 70 points,” said Ambreesh Baliga, vice president (equities), Karvy Stock Broking. The NSE index, Nifty, fell 4 per cent last week to close at 5,036 on Friday while Sensex shed 4 per cent to end at 16,859.68 . Realty, capital goods and oil stocks were the worst hit.

ICICI Direct, in a note to its clients, has said that “looking at the overall scenario along with the fact that both indices broke some crucial support levels the market is expected to be weak in the coming week also”.

FIIs were selling due to the rise in dollar value after China tightened its monetary policy,” said Baliga. In a similar context, Manish Sonthalia of Motilal Oswal Financial Services said “Global factors are preceeding everything else”.

FIIs net sold equities worth more than Rs 3,800 crore last week. And with the dollar showing signs of strengthening, FII selling is expected to continue analysts said.

US President Barack Obama has called for restricting the size and trading activities of financial institutions in order to reduce the risk quotient and prevent another financial crisis. US financial majors like Morgan Stanley, Goldman Sachs, Bank of America and American Express have all lost significant ground in the last couple of days. The VIX index in the US - popularly known as Wall Street’s “fear guage” - has jumped 55 per cent in the last three days indicating high volatility ahead. European stocks registered their worst week in nearly three months.

Meanwhile, back in India, Power Grid Corporation of India, State Bank of India, Wockhardt, Hero Honda and Mahindra &Mahindra are some of the large entities that would be announcing their numbers in the week.