Weekly Newsletter - March 14 2008

The euphoria generated by Federal Reserve's US$200bn lifeline to the strained credit markets proved short-lived. News about near bankruptcy of a Carlyle fund and an emergency bailout of Bear Stearns raised fresh concerns about the ongoing turmoil in global credit markets. US stocks, after bouncing early on Friday on a benign CPI report, turned sharply lower after JP Morgan and the New York Federal Reserve agreed to provide funding to Bear Stearns after the securities firm said its cash position has significantly deteriorated. Shares in Europe too tumbled following the Bear Stearns news. FII figures for Friday (net sales of Rs3.58bn) will also hurt sentiment. So, expect another weak opening on Monday when trading resumes. The bulls are unlikely to get any sustained period of respite till the ongoing crisis in the US is settled once and for all. How much time this will take only time will tell. Till then the outlook remains negative. The Fed is expected to announce another rate cut on March 18. That could prop up the sentiment, but only temporarily. We also have to ponder over the sharp slowdown in the Indian economy and what it could mean for earnings growth going ahead. The advance tax numbers will be released next week and should provide some indication about India Inc's financial health. Stay light and don't buy anything unless one is prepared to hold onto the shares for considerably longer time. Having said that, one may get shares even cheaper if one is willing to wait a little longer