Market is expected to turn volatile on account of two key events which have kept investors and market participants on the edge this week.
The US Federal Reserve will hold its two-day Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday, followed by a press conference by Fed Chairman Ben Bernanke. Investors are now on the edge of their seats to see whether US Federeal Reserve decides to scale back its bond-buying program earlier than scheduled, which could lead to a significant correction in emerging markets, including India, in the short-term and dampen the festive spirit too.
A majority of economists polled by Reuters expect the taper to happen in March, but a recent run of upbeat economic data has steadily shortened the odds on an announcement at this week's two-day meeting concluding on Wednesday -- or in January.
Back home, market participants said expectations of a rise in interest rates by the Reserve Bank of India (RBI) and US Federal Reserve's comments on its stimulus programme are likely to keep the market nervous in the week ahead.
Also, all this is likely to put pressure and increase volatility in currency as US dollar is expected to appreciate against the rupee. So, should you long IT and pharma stocks? IT and pharma are export oriented and will benefit from rupee depreciation. Find out what stocks to pick from the packs.
SmartInvestor : What do make of this pullback rally and will market continue its sideways sway ahead? What are the key levels to watch today
Devangshu Datta : Weakening trend visible now. A fall below 6150 Nifty futures could mean a drop till 6100. Upside, 6225 (futures) is a key resistance
SmartInvestor : What strategy will you suggest to investors with respect to the volatility ahead on account of respective policy meets of US Fed and RBI?
Devangshu Datta : Keep wide stop losses %u2013 about 2.5 or 3x of normal stops if you are in financial counters/ Bank Nifty. Directional trend difficult to call, market generally expects harsh measures so it could see a relief rally if 1) Fed doesn't taper in Jan and 2) RBI doesn't hike Repo more than 25 basis pts.
SmartInvestor : What will you suggest to those invested in Bank Nifty?
