Dalal Street is likely to witness volatile trade this week as fears of protracted global economic turbulence are anticipated to offset expectations of fresh economic measures from US President-elect Barack Obama, analysts said.
“Volatility is likely to continue this week and Dalal Street will look for cues from the overseas markets as even local mutual funds have turned sellers,” said Arun Kejriwal, the director of Research and Investment Services.
Analysts believe the changes to be brought about by Obama for stabilising the economy may not help in abating the fears of a prolonged economic slowdown, which is likely to make global markets remain jittery. The BSE Sensex had gained 230 points to settle at 9,964.29 points last Friday on the back of encouraging global cues and a rise in the infrastructure output in September.
SMC Global Vice-President Rajesh Jain said, “Markets are likely to be volatile this week and may strengthen if the US and the UK markets stabilise. The trigger for the domestic market could be the further appreciation of the rupee against the dollar this week.”
The rupee appreciated to 47.63 against the dollar on Friday and analysts believe further strengthening of the Indian currency may help boost the market sentiment.
Analysts also believe the data of the Index of Industrial Production (IIP) for September, which would be released on November 12, may provide some direction to the markets.
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Central banks across the globe have been rushing to cut interest rates during the previous week to shore up the world economy and to fight the turmoil in the financial markets.
The Reserve Bank of India (RBI) said on Friday it would provide foreign exchange liquidity to foreign branches and subsidiaries of Indian banks through forex swaps of up to three-month tenure. RBI said the move would provide flexibility to Indian banks in managing their short-term credit needs at their overseas offices in the context of global developments. Marketmen said the marginal increase in weekly inflation numbers may also prove to be a negative factor.
Interestingly, foreign institutional investors have been net buyers in the first week of November, purchasing equities worth Rs 1,777.40 crore. However, so far this year, they have made net sales worth Rs 50,361.60 crore.