Mkts may be hit in Jan despite pricing in results: Experts

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The benchmark indices witnessed selling pressure throughout the session amid volatility. The Nifty went closer to the 2,900 mark but did not break that level. It closed with a loss of 51.80 points or 1.74% at 2916.85 after touching an intraday low of 2,900.45. The Sensex hovered around the 9,600 level for a major part of the day; it hit a low of 9,502.53 before ending the day at 9,568.72 down 118.03 points or 1.22% from previous close.

 

Even as trade continues to be volatile, experts are mixed on the forecast for the market's short- and long-term courses. However, one thing is unanimous - the January results would be bad but they might have been priced in till now. Pressure on the markets, the experts added, would be seen once the results actually come out.

 

Pullback rally over?

 

Nitin Raheja, CIO, Rada Advisors, says the maximum the Nifty could have gone on the upside was 3,200. "Post that, it was always very difficult to justify valuations. As we get into January, one might see a pullback again broadly back to 3,000 levels in the short term depending on the new stimulus package," he said, adding, "However, once the [January quarter] results start pouring in, the markets will come under pressure again."

 

Impact of January earnings

 

Portfolio Manager PN Vijay feels any positive surprises - if there are any in the first place - could come from the construction companies and PSU banks. "Many of them have nice contracts and the market generally feels all construction companies are in trouble," he said. "PSU banks don't have any great non-performing assets (NPAs) to worry about."

 

Vijay added that generally the earnings would be bad but the market might have discounted those. "Having said that, when the results do actually come out, there could be a bit of a jolt."

 

Short-term market course

 

On how could the market pan out over the next couple of trading sessions, Gaurav Ranade of Edelweiss Securities, said, "2,860 for me is a good technical level and the Nifty is still in an intermediate bull trend. The likelihood of seeing a pullback rally from this point onwards especially above 2,960 levels is good." He said the Nifty reached an overbought state at 3,110 - which it reached in the recent rally - "and we also saw a double top being formed. So on the upside, I would say that 3,110 levels would be a very strong resistance."

 

Talking about the January course, Nitin Raheja feels the Nifty would find support at its October low and sees it trade ranged between 2,500 and 3,200. "However, having said that, it would depend on fund flows - [if the flow is outward] we could even breach the lows."

 

PN Vijay is, however, more optimistic on the next two months. "I think we will have tremendous momentum coming into the next two weeks because the sense is that India is slowly coming out of the woods," he said. "Increasingly, there is good news on the macro economic front. If the stimulus packages start kicking into the system - even as it will take a bit of time - we should be seeing firm trading." Vijay, though, said the market course in the short term could also boil down to foreign institutional investor (FII) selling. "Throughout December, FII selling has been rather muted, which is why we had a very strong rally."

 

Forecast for 2009

 

Vijay said the Nifty would not retest the lows of 2,600-2,700 and would start consolidating first. He added that how far the Nifty goes up after consolidation would depend on how US's economy pans out and how effective its President-elect Barack Obama is in stemming the rot. "Going forward though, I feel we should build from this Nifty 3,000 level quite nicely."