Crash...make the best of it!

Things turn out the best for the people who make the best of the way things turn out.- John Wooden

A gap down opening could be a blessing. The Indian market is set to correct at start merely on account of the global crash witnessed over the weekend. A weaker-than-expected U.S. jobs.

report, continued concerns about the European debt crisis (with Hungary part of the action) and the fall of the euro left no trace of bulls on the street. The worry on the street is if Hungary too is reeling, how bad would the actual situation be with other emerging markets in Central and Eastern Europe?

The Dow is down ~11.4% from its April 26 highs which brings academic interest on whether or not its heading into a bear market. Asian markets are understandably weak and the contagion in the market will spread to the Indian indices as well. While strong support could set in around the 4950 levels for Nifty, it may be worth a nibble at stocks which will fall for just no fault of their own.

Back home we have the Empowered Group of Ministers (EGoM) meeting today to decide on petroleum products pricing. Should the government bite the bullet, we should be geared for a Rs3 hike in fuel prices. Perhaps a phased hike could be a safer option the government may choose.

Rcom, which was among the prominent gainers last week could continue to witness action after the board approved in-principle the induction of strategic / private equity investors into the Company for an up to 26% equity stake at an appropriate premium to the prevailing market price. The company will also examine and pursue other appropriate strategic combination / consolidation opportunities.

While the near term worries, mostly global will continue to power the bears, the larger picture too needs to be kept in mind. The government is doing well on the fiscal front thanks mainly to the 3-G auctions. Achieving the disinvestment target could add to the confidence of fiscal consolidation being on the right path.

Though volumes on the stock market may not be anywhere near their highs, the proportion of deliveries has increased. Reports state that in the National Stock Exchange, the proportion of delivery-based trades for April 2010 were 28% of the overall shares traded on NSE while for BSE, the delivery trades stood at 38% in April.

Meanwhile, a FIICI survey suggests that ‘India is likely to see flight of capital from its equity and debt markets in the next six months as global investors hesitate to pour money outside the US because of the European debt crisis.’

"With de-leveraging (belt-tightening) expected to continue in the global markets, there is likely to be flight of capital from equity markets in emerging economies, including India," FICCI study stated.