Gujarat election results to set market tone

After remaining weak for the better part of the week ended on the back of higher inflation concerns and uncertain global cues, the markets, enthused by exit poll results of Gujarat assembly elections, rallied on Friday to close on an optimistic note.

The Sensex closed 216.27 points higher at 33,462.97 while the Nifty ended 81.20 points higher at 10,333.30.

It is pertinent to observe that FIIs have been net sellers of around ` 5,000 crore for the month of December so far. In contrast, DIIs bought shares of around ` 4,591.57 crore.

With the end of Q2 results season, focus will now shift to Parliament. FRDI Bill is expected to be tabled in the upcoming session for creating a framework for resolving bankruptcy in banks, insurance companies and other financial establishments. The Bill proposes ‘ bail- in’ as one of the methods to resolution, where the banks issue securities in lieu of the money deposited. In the past, bail- in efforts had largely worked against depositors. In Cyprus, depositors lost almost 50 per cent of their savings when a bail- in was implemented.

The biggest worry might be the return of inflation, say observers. There is little evidence of it in the market right now as pricing pressures remain mild but it could change dramatically if oil prices, currently hovering just under $ 60 a barrel, climb further. A further spike in crude prices could impact fiscal deficit.

Near- term trend will be dictated by outcome of Gujarat elections, crude prices, FII investment pattern and cues on the global front with respect to North Korea, Brexit and the tax issue in the US.