Week ahead: Market to take direction from IIP data, global trend

After opening on a highly negative note last week and extending its losing streak to a sixth successive session, the market got back to its winning ways with the bulls staging a comeback and driving stock prices up for three straight days. The rally ignited by some encouraging economic reports from US and the resultant buoyancy across the globe, gathered momentum after the government mandated more sales of shares by PSUs and changed the rules on how it can use the proceeds and boost revenues to rein in a widening budget deficit.

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The announcement that all profitable, listed state-run firms must have at least 10% of their shares in public hands, and unlisted firms that had a positive net worth, no accumulated losses and a net profit over the past three years should list, proved a strong trigger for investors to chase PSU stocks till the end of the week.

The government, which said the funds from the listings would be spent on social schemes for three years. The government also said it was debating the need for changes in tax laws including on saving schemes, capital gains for non-residents and tax pacts with other nations, as part of reforms to boost revenues, also stated that it will maintain fiscal stimulus until the recovery is secure.

Among the news to watch out for in the coming week will be industrial production data for September 2009. The government will release the figures on Thursday, 12 November 2009. The data on inflation, which is to be released on a monthly basis hereafter, will also hit the stands on that day.

The IIP data will have a significant impact on price movements next week as moderation in core sector growth in September 2009 after signs of pick-up in industrial growth in the last few months had raised some concerns about the pace of recovery.

With the reporting season having come to an end, the market is likely to look for global cues over the next few weeks. While a few disappointing reports could trigger some corrective spells, positive indicators can make the bulls go shopping for stocks once again.

PSU stocks, which were the star performers last week, are likely to stay in focus. However, investors may look to book some profits in select stocks from this space as the recent rise incredibly sharp.

Metal and realty stocks too changed track and moved up north in style. Expect some profit booking or trimming down of positions in these sectors as well. The performance of information technology stocks will depend on the contents of economic reports from US, and the strength or weakness of the rupee against the dollar.

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The raging price war and recent reports about telecom firms misrepresenting customer growth figures may render top telecom stocks quite sluggish for a better part of next week. If the overall sentiment improves dramatically, then one will get to see some strong rallies in the telecom space. In the event of the market turning bearish, investors are likely to stay tuned to the FMCG and pharma sectors.

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