Sensex to hover around 19k mark

Stock market investors who slipped into sombre mood after Sensex plunged 300 points on April 12 following disappointing results from IT biggie Infosys were in for a surprise when the country's premier stock market index soared a whopping 774 points and closed above 19k mark last week. The BSE Sensex which closed at 18243 on April 12 continued its downward spiral and reached this calendar year's low of 18144 on Monday last week. However, the index turned distinctly bullish by the time the stock market week ended on Thursday. The Sensex scaled to the week's high of 19059 before closing at 19016 with a promise of gaining further provided no major negative factors would emerge this week. Though Sensex commenced its journey on negative note on Monday, the things suddenly changed in favour of the buyers as a host of good and positive news started coming in. The wholesale price inflation (WPI) fell more than the expected to a 40-month low of 5.9 per cent in March as industrial demand slipped along with prices of food items. The other positive factor came in the form of Brent crude oil price falling below $100 level after a long while. And bullion prices too received a hard knock this week. The fall in inflation and likely check in the drain of foreign currency on imports of crude oil and gold, came as a positive surprise for the stock market operators. The bear operators soon turned frantic buyers of equities in which they had gone short in the previous week following Infosys results and indications from FIIs that they might opt for other emerging markets. These major investors in the Indian stock markets had only recently turned sellers but after the situation changed favourable and the rupee became strong, they turned net buyers once again. Both crude oil and gold imports have caused the biggest drain on India's finances, widening the current account deficit (CAD) to a massive 6.7 per cent, and constraining the Reserve Bank of India (RBI) from cutting rates. RBI Governor D Subbarao will review interest rate on May 3, and most probably will cut the same by at least 0.25 per cent, though the market optimists place the cut to a sensible 0.50 per cent. These optimists have been banking on the slump in IIP numbers for their 0.50 per cent cut hope. Now, the apex bank has to completely change its focus from fighting inflation to growth if it has to generate jobs and income for people, say economists. It is this point that the optimists are banking on a higher rate cut in the ensuing RBI meet.

Interestingly, a few leading IT companies including HCL and TCS and also a few banking ones came out with highly encouraging results for the quarter ended March, 2013. Reliance Industries also cheered the markets with a significant improvement in its ratios and numbers. Although, many factors have turned suddenly positive but other issues like escalation of tensions between two Koreas and eruption of terrorist activity in the US are most likely to cause major hurdles in the way of the markets staging an uninterrupted uptrend. Most probably, increased selling in the nature of profit-taking will be the immediate factor that will keep the markets in the vicinity of 19,000 mark. It would be therefore advisable for the investors to buy only when there is a major price correction or else sell a part of holding if the prices continue to go up.