Resilience in the midst of risk!

Investment planning is about structuring exposure to risk factors.

When the main indices come crashing down, suddenly a host of risk factors appear to gain prominence. The market will have to contend with a deluge of earnings, the F&O expiry and the RBI policy. While the Sensex saw its worst weekly loss (of ~700 points) since October 2009, there are a number of mid-caps which have been moving higher, some even hitting upper circuits.

The market will be shut on Tuesday on account of Republic Day. As far as India is concerned, the RBI is most likely to opt for a calibrated hike in policy rates even as the Government mulls partial rollback of duty cuts.

We expect a soft start for the key indices. Friday's commendable recovery in the face of a worldwide sell-off could be tested at start following yet another triple-digit loss for the Dow.

What could possibly save the bulls from further misery would be stronger than expected earnings announced from the likes of RIL, Maruti and ITC. Hopefully, other big results this week will bring in some resilience to the market.

Asian stock indices have extended last week's fall amid worries that the new Obama proposals to restrain large banks from investing in hedge funds could adversely affect global fund flows and risk appetite. Meanwhile, economists say that the ongoing recovery in the US economy can't be sustained. The same could also be said about other industrialised nations.
Among the other big worries is how the impending stimulus withdrawal by policymakers later this year will impact the economic recovery and markets. Possible overheating in China and monetary tightening by Beijing has also been causing a few jitters of late.

The fall on Friday was amid higher volumes. The combined volumes on the BSE and NSE stood at a record Rs1590bn—the highest ever; of this Rs1320bn came from the NSE's derivatives segment.

Results Today: Andhra Bank, Blue Star, Cadila Healthcare, Cummins India, DB Corp., GSK Consumer, Godrej Ind, Gujarat Alkalies, GSPL, HCL Info, HCL Tech, Hero Honda, Hindalco, Hotel Leela, India Cements, Indiabulls Fin, Indiabulls Sec, Jet Airways, KEC Intnl, LMW, LIC Housing, M&M, Pantaloon, Power Grid Cop., SBI, Shyam Tele, Sterlite, TTML, TV Today, Voltas and Wockhardt.
FIIs were net sellers in the cash segment on Friday at Rs24.15bn on a provisional basis. The local funds were net buyers of Rs19.54bn, according to figures published on the NSE's web site. As per the SEBI figures, FIIs were net sellers of Rs5.7bn in the cash segment on Thursday.
US stocks tumbled for a third successive session on Friday as analyst downgrades routed the technology space amid uncertainty over Ben S. Bernanke's confirmation for another term as head of the Federal Reserve.
Worries about the possible ramifications of White House's proposed new restrictions on big banks coupled with growing speculation of further monetary tightening by China continued to cast a shadow on Wall Street.
The Dow Jones Industrial Average slumped 217 points, or 2.1%, to 10,172.98. The S&P 500 index slid 25 points, or 2.2%, to 1,091.76. The Nasdaq Composite index plunged 60 points, or 2.7%, to 2,205.29.
In the three day selloff, the Dow lost 5.1%, the S&P lost 5.1% and the Nasdaq lost 5%.
For the holiday-shortened trading week, the S&P 500 was down 3.9% and the Nasdaq shed 3.6%, with both indexes seeing their biggest one-week declines since the week ended Oct. 30, 2008.
The Dow's weekly loss of 4.1% was the average's worst since the week ended March 6, 2009, when it closed at a 12- year low. That period was considered to be the bottom of the bear market. Since then, the Dow has gained 57%.
In other markets, the dollar lost ground, crude oil prices fell below US$75 per barrel and gold futures slipped.
Selling on Wall Street began on Wednesday on reports that China has asked banks to slow the pace of lending in a bid to pre-empt any spike in inflation and prevent any possible overheating. The fall picked up on Thursday with Obama's fresh offensive against banks and continued on Friday with questions about Bernanke.
US stocks were vulnerable to a pullback after surging over 3% since the start of the year, with the major indices having touched nearly 16-month highs.
Obama called for limiting the size and trading activities of financial institutions as a way to reduce risk- taking and prevent another financial crisis.
The proposals, to be added to an overhaul of regulations being considered by Congress, would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds.
Meredith Whitney, an influential banking analyst, said Obama’s plan will probably be approved and may dramatically reduce trading profits.
Morgan Stanley Asia Chairman Stephen Roach said Obama’s plan amounted to "bank bashing" and called on American politicians to take a more balanced approach.
Large banks such as JPMorgan Chase, Goldman Sachs and Bank of America would bear the brunt of the impact from the Obama bank regulations. shares of all three slipped on Friday. But a few of the regional banks, including Fifth Third Bancorp and SunTrust Banks bucked the trend for a second straight session.
General Electric (GE) reported weaker revenue and earnings versus a year ago that nonetheless beat analysts' estimates. GE also reported higher sales and profit versus the previous quarter, with the exception of its struggling NBC Universal unit. Looking forward, GE said it sees solid growth next year. Shares added 0.6%.
Schlumberger shares dropped 4.5% after the world’s largest oilfield-services provider said that fourth-quarter profit fell 31% after oil producers slashed spending during the global recession.
Fellow Dow component McDonald's reported higher quarterly sales and earnings that topped estimates, with strength in international markets offsetting any weakness in its US business. Shares rose 0.3%.
After the close on Thursday, American Express reported higher earnings that beat forecasts on flat revenue that also beat estimates. Nonetheless, shares of the financial services firm lost 8.5% in Friday's trading.
Shares of Google dived 5.7% despite the Internet giant's surge in fourth-quarter earnings. The company's earnings and revenue came in well above analysts' estimates, but investors were probably looking for more.
Also weighing on the technology space was Citigroup's move to cut its ratings on seven semiconductor-equipment stocks, citing the risk of a correction of perhaps 30% in the sector for the short term, though a broader bullish trend remains intact.
A report showed that December jobless rates rose in 43 states and the District of Columbia versus the previous month. The trend marked a reversal from November, when a majority of the states saw unemployment rates dip from the prior month.
Manufacturing in the Philadelphia region expanded in January for a fifth straight month, pointing to a factory rebound that is helping lead the economy out of the recession, according to a report from The Federal Reserve Bank of Philadelphia.
Investors also considered reports that some congressional Democrats are growing skittish about confirming Bernanke to a second term as Fed chairman. Bernanke's term ends in a week, but the Senate lacks the 60 votes to force a confirmation vote.
A failure to confirm Bernanke would really rattle the markets as he is viewed around the world as a positive for the US economy.
The dollar fell versus the euro and the yen after rising for the last few sessions.
COMEX gold for February delivery fell US$13.50 to settle at US$1,089.70 an ounce. Gold closed at an all-time high of US$1,218.30 an ounce last month.
US light crude oil for February delivery slipped US$1.54 to settle at US$74.54 a barrel on the New York Mercantile Exchange.

Treasury prices fell, raising the yield on the 10-year note to 3.61% from 3.69% late on Thursday.
The market could sell off a little more next week, but it is most likely to find a support in the week ahead. A heavy spate of quarterly earnings reports are due next week, with 27% of the S&P 500 or 136 companies scheduled. Among the key ones include Apple, Yahoo, Microsoft, Amazon.com and Chevron.
The Chicago Board Options Exchange's Volatility Index or VIX jumped 6.2% to 23.66, its third straight daily gain, and the longest string of increases since October. The index is on track for a 32% weekly rise.

VIX was boosted by worries that Chinese authorities are a little uncomfortable with the break-neck pace of economic growth. Also, fears over new bank restrictions proposed by the Obama administration, and potential sovereign debt defaults in Europe, have unsettled investors of late.
The markets' reaction to the Obama plan was perhaps knee-jerk and the undertone may improve next week. Stock markets have gained sharply for a long period of time and the selloff was perhaps the sign of a market trying to let off steam.
Bank shares in Europe continued to slide on fears that they would also feel the heat from the Obama administration’s plans to curb excessive risk taking by financial firms. The pan-European Dow Jones Stoxx 600 index dropped 1.1% to end at 249.91, the third straight losing session for the index.
The UK FTSE 100 index declined 0.6% to end at 5,302.99, while the German DAX index settled 0.9% lower at 5,695.32, and the French CAC-40 index finished 1.1% lower at 3,820.78.

Indian markets witnessed its first weekly losses of the year on account of disappointing earnings by L&T and US President Obama’s proposal to put new limits on the size and trading practices of big banks weighed heavily on Dalal Street. Moreover, key indices had largely been consolidating after last year's stupendous rebound, so a correction was long overdue. Finally, the BSE Sensex closed the week lower by 4% and NSE Nifty lost 4.1%.

BSE Sensex hit an intra-week high of 17,712 and low of 16,608 while, NSE Nifty hit an intra-week high of 5,293 and low of 4,955.

The top gainers: The top gainers in the Sensex were Maruti Suzuki (up 2.2%), Bharti Airtel (up 1.5%), Hero Honda (up 1.5%), Hindustan Unilever (up 0.6%) and BHEL (up 0.4%).

The Top Losers: The top losers in the Sensex were L&T (down 10.9%), Ranbaxy Labs (down 9.5%), DLF (down 8.7%), Tata Power (down 8.4%) and Grasim (down 8%).

On Friday, The BSE Sensex fell 191 points to end at 16,859 after touching a high of 17,000 and a low of 16,608. The Nifty fell 58 points to end at 5,036.

Equity markets in Asia ended in the red. The Nikkei in Japan was down 2.5%, while Australia's S&P/ASX ended lower by 1.6%. The Shanghai SE Composite ended flat and Hang Seng index in Hong Kong was down 0.7%.

In Europe, stocks were trading in the red. The DAX in Germany was down 0.5% and the CAC 40 index in France was down 0.3%. The FTSE in the UK was flat.
Coming back to India, the BSE Banking index was the top loser, shedding 1.8%, followed by the Realty index that was down 1.7% and the BSE IT index was down 1.5%. The BSE Mid-Cap index slipped 1.1% while BSE Small-Cap index was down 1%.

Among the 30-components of Sensex 27 ended in the negative terrain and only ITC, HEL and HUL ended in the green. L&T, Infosys, Tata Steel, ICICI Bank and HDFC Bank were among the top losers.

Outside the frontline indices, the big losers in the broader market were REI Agro, Gujarat NRE Coke, Fin Tech, Ispat Ind and Pantaloon Retail. On the other hand, gainers included HCC, NMDC, LITL and Piramal Healthcare.