New high in the offing

Reach high, for stars lie hidden in your soul. Dream deep, for every dream precedes the goal.

After a really long weekend, the market could be headed for a new high before bidding farewell to the year 2009. However, with only three trading sessions and F&O expiry one will have to brace for a volatile week. Trading might be thin, both here as well as overseas, as many players would have opted for an extended year-end holiday. As for today, we see a modestly higher opening for the key indices and sideways movement. We would urge some caution at this juncture, as the market has already had a spectacular rally this year.

The headroom for further advance is limited. One will have to be extremely choosy and careful. Factors like rising inflation, an impending hike in interest rates and high fiscal deficit could weigh on the sentiment. There are also worries as to how different nations go about withdrawing the emergency stimulus measures, and how it may affect the economic recovery. On the corporate front, future earnings growth will have to reflect pick-up in demand rather than just cost cutting.

US stocks were higher at the open on Monday, with all three major stock indicators extending their year highs, thanks to gains across Asia and much of Europe. Investors continued to seek out yield in currencies markets on Monday, as the year-end rally in risk appetite continued. Investors made the best of thin trading conditions to extend the end-of-year rally which has pushed global stocks to within a fraction of year highs. Strong economic data from Japan helped ease fears that the country would suffer a double-dip recession and pushed the stock market to a 14-month high.

FIIs were net buyers in the cash segment on Thursday at Rs7.07bn on a provisional basis. The local funds were net sellers of Rs1.1bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs8.99bn. FIIs were net buyers of Rs13.53bn in the cash segment on Thursday. Mutual Funds were net sellers of Rs1.01bn on the same day.

US stocks ended a choppy session higher on Monday, with the Dow, S&P 500 and Nasdaq managing fresh 2009 highs on some optimism about a recovery in retail sales and gains in select sectors.

The Dow Jones Industrial Average rose 27 points, or 0.3%, ending at the highest point since Oct. 1, 2008. The S&P 500 index finished almost flat, and ended at the highest level since Oct. 1, 2008. The Nasdaq rose 5 points, or 0.2%, ending at the highest point since Sept. 3, 2008.

Stocks had risen in the morning as investors welcomed a report showing some improvement in holiday retail sales, lost steam in the afternoon and then recharged by the close. Stocks have now risen for six straight sessions. All financial markets were closed early on Christmas Eve and were closed for Christmas.

The market is back to levels not seen since the fall of 2008, around the time of the collapse of Lehman Brothers. Year-to-date, as of Monday's close, the Dow is up just over 20%, the S&P 500 is up 25% and the Nasdaq is up 45%. But all three major indexes are up even more substantially since hitting multi-year lows on March 9 amid the height of the financial crisis.

All financial markets are open on Thursday ahead of New Year's Eve, but are closed Friday for New Year's Day.

Sales at US retailers look to have risen in the all-important holiday shopping period. Early estimates from the National Retail Federation suggest sales in November and December fell 1%, an improvement from a 3.4% drop for the same period a year ago.

Sales at US retailers rose 3.6% between November 1 and Christmas Eve, according to a report released by SpendingPulse, a unit of MasterCard, Reuters reported.

Shares of Fannie Mae and Freddie Mac rallied after the Treasury Department removed its $400 billion cap on the amount of money it will spend to keep the companies afloat. Treasury said that it will now increase support depending on how much each company loses per quarter.

Fannie and Freddie are government-run mortgage lenders that own or guarantee about half the mortgages in the country. But the two stocks were an exception in an otherwise weak bank sector.

COMEX gold for February delivery rose $3.10 to settle at $1,107.90 an ounce. Gold closed at an all-time high of $1,218.30 an ounce earlier this month.

US light crude oil for February delivery rose 72 cents to settle at $78.77 a barrel on the New York Mercantile Exchange.

The dollar gained versus the euro and against the yen.

Treasury prices fell, raising the yield on the 10-year note to 3.84% from 3.80% late on Thursday. Prices had been even lower ahead of the latest auction of two-year note, which saw lighter demand than in recent months.

European stock markets hit fresh 14-month highs, with Greek stocks firming after the government passed a budget for 2010, and with utilities and financials ranking among the strongest sectors. Equity volumes were thin, however, with London closed for a holiday.

European stock indexes last week climbed to highs last seen in October 2008 ahead of the Christmas holiday, and the markets went on to surpass those levels at the start of the final week of 2009.

The pan-European Dow Jones Stoxx 600 index rose 0.5% to 253.17, its loftiest in 14 months. In Paris, the CAC-40 rose 0.9% to 3,947.15, eclipsing the previous 14-month closing high of 3,912.73 set Dec. 24. The German DAX index climbed 0.8%, breaking through the 6,000 barrier for the first time since September 2008.

The BSE Sensex gained 130 points to end at 17,360 after touching a high of 17,413 and a low of 17,197. The NSE Nifty advanced 34 points to end at 5,178.

In Asia, the Nikkei in Japan was up 1.5%, while Australia's S&P/ASX ended higher by 1%. However, the Shanghai SE Composite fell 2.5% and Hang Seng index in Hong Kong was up 0.9%.

In Europe, stocks were trading in the green. The DAX in Germany was up 0.5% and the CAC 40 index in France was up 0.2%. The FTSE in the UK was up 0.3%.

Coming back to India, all the BSE sectoral indices ended in the green, the Auto index was the top gainer, adding 1.4%, followed by the Metal index that was up 1.1% and the BSE Consumer Durables index was up 1%. Even the BSE Mid-Cap index gained 0.7% while the BSE Small-Cap index was up 0.5%.

Among the 30-components of Sensex, 25 stocks ended in the positive terrain and 7 ended in the red. Tata Motors, Hindalco, Reliance Infra, Tata Steel and Hero Honda were among the top gainers.

On the other hand, among the major losers were JP Associates, Bharti Airtel, RCom and ICICI Bank.

Outside the frontline indices, the big gainers in the broader market were Shriram Transport Fin, HCC, BEML, Fortis Health and Apollo Hosp. On the other hand, losers included REI Agro, Idea, REC and KSK Energy.