What is your market outlook for 13 January for the Nifty and Sensex at a time when the Sensex is nearing 50,000 levels?

On Tuesday, the Nifty touched its highest ever valuation of 40 P/E while the Sensex got very close to 50,000 levels. This was despite the pressures in the market and the signals of monetary tightening. The focus will now shift to whether the Sensex can actually traverse the distance to 50,000 in this week and how tough a resistance it would be.

FMCG majors came under pressure on Tuesday after they had admitted that input costs had gone up sharply. Most FMCG companies hinted that they would be looking to hike prices of their products, sooner rather than later. However, markets were unconvinced whether the fluid demand conditions and competition would permit a price hike by these FMCG majors.

Global buying into Indian stocks continued unabated on Tuesday. FPIs were net buyers to the tune of Rs572 crore, albeit at a much lower rate. DFIs sold Rs.1335 crore on Tuesday. In the first 8 trading sessions of the month, FPIs have infused Rs.12,500 crore into Indian equities. Domestic institutions have remained on the sell side through the rally.

Global cues re not too suggestive for Wednesday. In fact, Tuesday was a relatively lacklustre day for global markets with the Dow and the NASDAQ staying in the positive but closing just about 30 bps higher. European markets also came under pressure but it was a lot more about sizing down trading positions. SGX Nifty does not show a very clear trend.

Sensex currently sits on the threshold of 50,000 levels, so there is a little bit of hope and also apprehension. The valuations of the index are at historic highs of 40X in P/E terms. The one factor to keep in mind is that any central bank effort to tighten liquidity could have a snowballing effect on the market. We have seen signals of that in reverse repo market.