Nifty struggles at 6300; midcap, smallcap shine again

Moneycontrol BureauLive Market Commentary

11:50 am Market outlook: Technical analyst Gautam Shah, senior VP at JM Financial says the market looks critically placed at this point in time. He has turned cautious on the market from his earlier bullish stance. He says the market is witnessing selling pressures at higher levels. He sees the first important support below 6250, after which he says 6170 becomes a key level for the Nifty.

He thinks the index could break below 6170 in January. “A close below 6170 would set Nifty up for a 5 percent decline at least,” he told CNBC-TV18 in an interview. A bullish stance can’t be taken until the Nifty crosses 6350, he says. However, he adds there are no immediate signs of weakness yet, though the price action in the Nifty has been lackluster. "The Nifty is setting up for 300 point move either way in the next 3-4 weeks," he says. He continues to advise investors to adopt a stock-specific approach.

11:40 am Macro outlook: Reserve Bank of India Governor Raghuram Rajan said the challenge of containing inflation is limiting the central bank's ability to boost economic growth, while urging the government to continue with fiscal consolidation to support the economy. The comments were included in the foreword of the central bank's financial stability report published on Monday, which comes after the RBI surprised investors by keeping interest rates unchanged this month after raising them by a total of 50 basis points in September and in October.

Analysts say the RBI could resume tightening monetary policy by early next year should inflation remain high, even as the economy is growing below the decade low of 5 percent posted in the fiscal year ending in March. The report also reiterated the RBI's previously stated concerns about the level of bad assets in the banking sector, while noting a corporate "failure" could trigger contagion in the interlinked banking system.

11:30 am Interview: In a bid to expand business, Muthoot Finance is now seriously considering foraying into the White-label ATM business, says George Alexander Muthoot, managing director, Muthoot Finance.

Speaking to CNBC-TV18 on the path ahead, Muthoot says this business segment will help the company gain access to those who are not their customers via gold loans. White-label ATMs are automated teller machines that dispense cash, but unlike the conventional ATMs, are owned by non-banking companies. On the plans for the future, Muthoot says the company has applied for housing finance that will cater to the rural and semi-rural masses.

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The market continues to be volatile and seems to ignore the RBI Financial Stability report. The Sensex is down 40.84 points at 21152.74, and the Nifty is down 18.00 points at 6295.80. About 1049 shares have advanced, 699 shares declined, and 92 shares are unchanged.

The RBI Financial Stability report says that delay in tapering allowed India to adjust current account deficit (CAD) and India has built buffers by replenishing forex reserves.

In the global markets, growth in China's factory activity may have pulled back slightly in December, a Reuters poll showed, reinforcing views that the world's second-largest economy could lose some steam at the year end while Beijing is shifting its focus to structural reforms, reports Reuters.

China's official manufacturing purchasing managers' index (PMI) likely eased to 51.2 in December, down a touch from November's 51.4, according to the median forecast of 11 economists in the poll.

Among the currencies, South Korea's won hit its strongest level in more than five years against the yen on Monday, ending the year up, but most emerging Asian currencies suffered losses to the dollar with the U.S. Federal Reserve to start tapering its stimulus in January.

The won rose as much as 0.2 percent to 9.9983 to the Japanese currency, breaking through a psychological resistance at 10.000 for the first time since September 2008.