Weekly Newsletter - Feb 6 2010

If it wasn't for strong rallies on Wednesday and Saturday's special session, the Indian market would have suffered more losses. So, to that extent the bulls should consider themselves lucky. However, fortunes may not be favourable to them all the time amid a spate of external concerns besides anxiety over the prospects for the Indian economy. If all goes well in Asian markets, we may extend the gains made in Saturday's special session on Monday. But, since we have already reacted to the US market's recovery, the advance could run out of gas. The sentiment might change for the better if a bailout of the troubled European economies is announced over the weekend. On the flip side, the market could slip anew in the absence of any concrete solution to the region's worsening fiscal issues.

The dismal show by the NTPC FPO and its fallout on the upcoming public issues is another cause for concern, as is the relentless selling by the FIIs. The overseas investors seem to be biding time given the escalated uncertainty and the fact that Budget is just round the corner. So, expect volatility to persist, though chances of a snap-back rally cannot be ruled out completely after the recent reversals. At the same time, one should not jump the gun and resume the buying binge as things might turn ugly again in case of further deterioration in the external environment. Next week will be a truncated one as markets will be shut on Feb. 12 on account of Mahashivratri. IIP data for December will be out next week and is likely to show continued improvement in the industrial sector. Industrial output grew by 11.7% in November.