Fed review, F&O expiry and corporate results to dictate Sensex movement

The US Federal Reserve's policy review on interest rates on January 27-28 will dictate market movement this week.

Mahesh Nayak, Senior Associate Editor, Business Today
Mahesh Nayak, Senior Associate Editor, Business Today
In December 2014, the Fed had said it would be patient in raising rates, but what will be keenly observed is its stance after last week's quantitative easing (QE) announced by the European Central Bank (ECB). Starting March 2015, the ECB will purchase bonds worth Euro 60 billion every month till September 2016.

Though there isn't any immediate concern, the uncertainty over Greece moving away from the euro zone will play heavily on the global and domestic markets. The leftist Syriza party in Greece won the elections on Sunday on assurance it will renegotiate Greece's debt obligations and there wouldn't be austerity in the country. The new Prime Minister, Alexis Tsipras, has come out as a winner on the promise that the country will persuade members of the euro zone to write-down Greek's debt as well as ask creditors to continue the aid flowing into the country.

Back home, quarterly results from Sesa Sterlite, HCL Technologies, ICICI Bank, Tech Mahindra, Idea Cellular, Kotak Bank, Union Bank of India, Havells, Ranbaxy, Asian Paints, Dr Reddy's Labs, HDFC, IDFC, Bank of Baroda and NTPC will be important to watch. With the Indo-US civil nuclear deal going through, stocks in the defence space will be keenly watched.

Meanwhile, last week the ECB's QE package and the International Monetary Fund (IMF) stating it expects India to surpass China's growth rate in 2016 lifted the BSE Sensex and the BSE Mid-cap to new all-time highs. The Sensex crossed the 29,000 mark and the BSE Mid-cap surpassed 10,700 levels. This has also helped in foreign institutional inflows into equity picking up over the past week - it was rather slow in the first half of January - though it is early days yet. So far in 2015, FIIs have invested nearly $1 billion. The market is now expected to consolidate ahead of the January 2015 futures & options (F&O) contract expiry on Thursday, January 29.

Investors should be careful at current levels as some stocks that have rapidly gained are in the overbought zone. The reason for staying cautious at these levels is also because corporate earnings growth for the quarter ended December 2014 is the slowest in eight quarters. The results are expected to be bad with low single-digit per cent growth in earnings.

The market expects the government to kick-start its reform process, boosting investment in the country. The signing of the civil nuclear deal is a step towards increasing investment. The market will also start building expectations ahead of the Reserve Bank of India's monetary policy on Tuesday, February 3, and the Union Budget next month.