Weekly Newsletter - Nov 8 2008

The market may continue to witness high level of volatility next week, as it struggles for direction after rebounding last week from the recent lows. As usual, the Indian indices will continue to be at the mercy of global cues, as the result season is over and there are hardly any local factors to drive the market. A cut in fuel prices might just be able to cheer up the market, as it will bring down inflation. The market would also welcome a cut in lending rates from private banks. PSU banks cut their rates this week at the behest of the Government. Apart from these, the IIP data for September is another factor that could have some bearing on the sentiment, especially if it turns out to be better than August.

Otherwise, the newsflow remains grim, with several companies announcing cut in production and capex to tide over the economic downturn. While valuations are looking attracting, investors are still wary of the future prospects as a global recession looks imminent. One should avoid aggressive purchases, as the indices may test their previous lows. The upside too appears to be capped, as every rally will be followed by profit booking. The market is going through a major crisis of confidence, and one should stay out until that is restored on a sustained basis.