Weekly Newsletter - Sep 5 2009

The key indices struggled for most of the week only to bounce back on Friday. The recovery was not enough to end the Sensex and Nifty in the green for the week. The coming week is likely to start on a directionless note. The US market will remain closed on account of Labour Day. Not much data is expected from the global or domestic market. The attention will be on the Oil India IPO, which will open on Sept 7. Just hope, Oil’s well that end’s well.

The finance ministers and central bankers from the G20 group of nations are likely to pledge this weekend to keep economic stimulus measures in place until recovery is certain. At the end of a two-day meeting in London they will seek to reassure financial markets that they have credible plans to withdraw the stimulus measures at the right time.

Policymakers worldwide are cautious, especially given the fact that most major economies are still shrinking this year and are only expected to post sluggish growth next year. The IMF now forecasts global shrinkage of 1.3% in 2009, a shade less than its April forecast of a 1.4% contraction, and growth of 2.9% in 2010, revised up from 2.5% previously. "Unwinding the stimulus too soon runs a real risk of derailing the recovery, with potentially significant implications for growth and unemployment," says IMF chief Dominique Strauss-Kahn.

Meanwhile, the US August non-farm payrolls fell by 216,000, beating Wall Street expectations. The smallest decline in payrolls since August 2008 was the 20th consecutive monthly drop. The US unemployment rate jumped to 9.7% in August versus estimate of 9.5%.

Coming back to the Indian market, the trend will remain volatile with no clear direction in sight in the near term. The broader market could yet again hog the limelight, with large caps looking relatively expensive. At the cost of sounding repetitive, we would urge caution as far as small- and mid-cap stocks are concerned. The overall market itself is looking tired after a terriffic run in the past few months. A wait and watch approach should help you to tide over the heightened uncertainty and volatility.