The market’s trading band has narrowed. It will not stay that way and will be resolved with a massive move. Will it be up or down?

The Sensex edged higher in early trading on Friday, tracking the rise in Asian stocks. However, it pared off early gains very soon and was mostly flat for the rest of the day. It closed at 17,554 points, 30 points lower than the previous day’s close.

The market’s trading band has narrowed down to an extreme. This usually presages a major move. We can’t say at this moment whether the market will end higher or lower, but a big move is certainly coming. 

Through the day, it touched a high of 17,639 and a low of 17,529 points. The Nifty ended the day down 9 points. The bullish sentiment was subdued as inflation in December 2009 touched a one-year high, reinforcing fears that the RBI will be forced to tighten monetary policy. The wholesale price index rose 7.3% in December 2009 from a year earlier, its highest level since November 2008 and accelerating from a 4.8% gain in November 2009. This is largely because of a 20% rise in food prices following a weak monsoon and flooding in parts of the nation.

Reliance Communications gained 4.76% after it got a nod from the market regulator to launch an IPO for its telecom tower unit. Power Grid Corporation of India (up 1.11%) has received its board’s approval for the participation in a joint venture with Nepal Electricity Authority and IL&FS for a 400KV Indo-Nepal transmission project. Tata Consultancy Services (up 1.48%) rose ahead of its quarterly result. Some of the banks have announced their results today. Axis Bank (up 1.52%) posted a growth of 4% and 51% in total income and operating profit in the December quarter over the same period last year. HDFC Bank (up 0.61%) reported a declining income (down 10%). However its operating profit grew by 11% over the same period. IDBI Bank (up 0.72%) posted a growth of 26% and 64% in income and operating profit for the December quarter over the year-ago period.

In the US markets on Thursday, the Dow gained 29.78 points, the broader Standard & Poor's 500 index rose 2.78 points and the Nasdaq Composite Index was up 8.84 points.