Indian stock market forecast for this week

Positive news from the US and the China over the weekend will most likely see the Indian markets open on a positive note today. However there are negative cues also, arising from Europe and Japan. But the overall sentiment is likely to remain positive.

The much-awaited US employment data surprised the markets with better than expected readings. This resulted in the Dow and the S&P gaining 0.62% and 0.29% respectively. However, the Nasdaq ended the day lower by 0.38% as Apple weighed on. Data from China indicates that the economy is spurting back to growth. Industrial output rose 10.1% YoY in November.

On the domestic front, the passage of the allowance of FDI in multi-brand retail in both the houses of the Parliament buoyed up positive sentiment. However, due to the strength in the dollar, these gains are likely to ease and the appreciation is likely to moderate. Government is most likely to table the insurance bill for parliamentary approval, this week. Markets may surge further if the government agrees to raise the overall foreign investment limit in insurance companies. The market expects the government to secure easy Parliamentary approvals for key financial sector reforms bills like the banking laws bill, micro-finance bill and the insurance & pension bill - some of which could be tabled this week.

Though markets have fared reasonably well over the past one month, investors are a bit jittery after intermittent contradictory rallies last week. Besides, hopes of interest rate cut by the Reserve Bank will guide investor sentiment

"Technically, the market is in an over-bought state. The Nifty rallied between 5548 and 5900 without any correction. So, if there's any negative news flow, we may see some minor profit booking," said Alex Mathews, research head at Geojit BNP Paribas Financial Services. BSE 0.19 %. In net terms, equity researchers are bullish about short-term markets, with many typifying it as a 'buy-at-dip' market. "The volatility index is hovering at 14 - 15 levels. This reflects high comfort levels to invest in equities. The market is heading towards 6000-levels," Mathews added.