Dalal St to remain subdued as holiday season sets in: Analysts

Dalal Street is likely to remain lacklustre this week amid the ongoing holiday season and festivities across the world, which is likely to impact trading volumes at stock exchanges.

“The market is likely to remain lacklustre as falling volumes and negative buying sentiment is expected to grip investor sentiment,” Kejriwal Research and Investment Services (KRIS) Director Arun Kejriwal said.

Analysts feel with the holiday season setting in and activities globally remaining subdued, the domestic market will not have much to cheer about.

“Portfolio allocation by institutional fund managers would be done after the first week of January. Hence, trading would be less till then,” Ashika Stock Brokers’ Research Head Paras Bothra said.

 

Besides, with lessened activities worldwide, the country’s geo-political situation would take precedence over other factors in deciding the movement of domestic bourses.

Amid reports that Pakistan has moved troops to the Line of Control in Pakistan-occupied Kashmir (PoK) and the International Border with India, and with a virtual security alert put into effect, analysts are divided over whether it would impact the movement on bourses.

“Sentiment is likely to be impacted by the development on the political front. The market would react based on the aggression of the government’s policy decision,” Bothra added.

However, Kejriwal felt that domestic bourses have already discounted the tense political situation last Friday. “The market would tide over the geopolitical crisis and flow with the tide,” he added.

Besides, the government is expected to announce its second stimulus package this week. However, analysts feel it would not trigger buying in the market for longer term. “The impact of the second stimulus package would be less as the market has been expecting it since last two weeks,” Kejriwal added.

Analysts said the domestic stock market witnessed selloffs last week on account of massive foreign institutional investor (FII) outflows. FIIs sold equities valued nearly Rs 1,000 crore during last week. Also, declining fuel prices pushed down the inflation rate to its nine-month low. The rate for the week ended December 13 slowed to 6.61 per cent, giving enough legroom to the Reserve Bank of India (RBI) to take more bold steps to boost economic growth.

The rate of inflation almost halved from this year’s peak of 12.91 per cent, prompting analysts to predict that it would fall to 2 per cent by the end of this fiscal. Besides, in the Mid-Year Review of the economy, the government pegged the country’s growth at around 7 per cent, adding that the decline in commodity prices will help bring down inflation to “normal levels” by March 2009.

On Friday last, the 30-share benchmark, Sensex, settled by plunging 240 points to close at 9,328.92 points. Over the week, the Sensex lost 771 points, while Nifty slipped 220 points to 2,857.25.