Panic opening…recovery later

Courage is resistance to fear, mastery of fear - not absence of fear.

Indian equities surged in late trades on Wednesday, enabling the key indices to close at day's high on hope that the RBI could soon announce a cut in interest rates. China on Wednesday cut it's lending and deposit rates, while also lowering the banks' reserve requirement. This was the fourth time that China slashed rates in the past 2-3 months to boost economic growth.

We expect the market's initial reaction to be down in the wake of the terrorist attacks in Mumbai. But, with US markets rising smartly on Wednesday and a follow up advance in other global markets, the sentiment may improve later in the day. However, Asian markets are trading mixed today. US markets were shut on Thursday due to Thanksgiving and will open only for half a day today.

Also, the government is scheduled to announce Q2 GDP numbers. Though, the figure is expected to moderate from Q1 growth of 7.9%, a better than expected reading could lift the mood on the street. On the flipside, a disappointing number could only add to the already mounting concerns over the economic slowdown.

We'll also have F&O expiry for the November series, which will add to the volatility. So, we advise investors to stay on the sidelines and not take undue risks till the dust settles on the terrorist strikes. However, history has shown that the markets do rebound after an initial knee-jerk reaction down post any such negative events.

Also, inflation has come down for the third successive week to 8.84% and is likely to fall further over the next few weeks. There have been expectations of further easing in monetary policy for some time after inflation fell into single digits. This may come true following the Mumbai terrorist attacks, as the government tries to shore up the market sentiment.