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Ambarish Mukherjee

MARKET trends for the coming week are likely to be a function of political decisions. If political tensions increase further, markets will react accordingly. Otherwise, amendments to the Budget proposals expected to be announced in Parliament which resumes on Monday and corporate results will be the determinants.

While the overall mood is mixed, marketmen expect some sideways movement. Encouraging results from index stocks may result in substantial gains in select counters.

Suggestions made over the weekend by the largest party of the ruling coalition regarding interest rates for senior citizens, tax benefits and subsidies, if announced in the House, will certainly have a strong impact on the market. The uncertainties are more on the equities front compared to that on the debt segment.

According to Mr Ashok Aggarwal of Global Capital Markets Ltd, who operates simultaneously on the National Stock exchange (NSE), Bombay Stock Exchange (BSE) and the Delhi Stock Exchange (DSE), "next week the market appears to be in the trading zone. Parliament too resumes next week and if some of the proposed amendments in the Budget proposals actually happen, as has been hinted over the week-end, this is going to be one of the factors that would have an impact on the market."

In particular, the market seems to be expecting some changes on the dividend tax. This year's Budget has proposed to make dividend income taxable at the hands of the recipients, which was tax-free earlier. Market operators feel that if the old provisions are restored, it will have a positive impact on the market.

"Simultaneously, if the message goes that the reform process is going to slow down, that will have a negative impact on the market. If the decisions related to reduction in subsidies on kerosene and cooking gas are diluted further, then that too will have an adverse impact on the market," Mr Aggarwal said.

This is also the season for annual results. Analysts feel that corporate results that are expected during the week, including a number of index-based scrips, are likely to provide some short-term direction to the market. In particular, technology stocks and FMCG companies could play a crucial role.

Simultaneously, the trends in the international market, particularly Nasdaq, will be a decisive factor.

There is not much expectation of gain from the bonds market as well though the RBI open market operations (OMO) may help prices move up by bringing down liquidity.

According to an analyst with Value Research, the firm which tracks the capital market and mutual funds and their investment patterns, "in the past week Government securities prices have fallen by almost 15 to 30 paise. Now the sentiment is cautious because last week the RBI has conducted an open market operation (OMO) which took out the excess money from the system thereby bringing down liquidity."

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