Weekly Newsletter - Apr 4 2010

After making new 52-week highs the main indices have yet again struggled for direction amid lack of follow-through buying. This has happened despite FII inflows having been positive and stable global markets. Economic reports, both local as well as global point to acceleration in the recovery process. Among the pressure points include high unemployment in the US and fiscal mess in Europe. Also, Japan continues to grapple with deflation and China is facing a potential bubble.

As far as India is concerned, things appear to be quite benign. And, though inflation remains a big worry along with its adverse fallout on interest rates, the policymakers are likely to be pro-active enough to prevent significant mishaps. The immediate catalyst for our market, as also for global equities will be the latest quarterly numbers and guidance from corporates for the coming quarters.

The markets are looking for further improvement in the earnings outlook. Therefore, any material disappointment on this front may lead to some cooling though there is no need to panic as such. The bias remains in favour of the bulls but some concerns prevail on valuations, which may keep the market in a limbo for a while before the bulls recharge the rally. So, it is going to be testing times and we would urge you to stay on sidelines before the clouds clear up a bit more.