Weekly Newsletter - June 20 2010

The Indian key indices failed to extend the recent winning streak, as Reliance group stocks declined after the much-awaited Reliance Industries AGM failed to live up to expectations. Other world markets were also struggling at the end of another positive week, calling into question the sustainability of the current rally. Meanwhile, gold broke through a key level in early Friday trading in New York. It rose as high as $1,260 an ounce. At the same time, the euro was headed for its best week since Sept. 2009. What is interesting is that despite Friday's losses, FIIs were net buyers of Rs7.79bn in the cash segment while local funds remained cautious, being net sellers at ~ Rs5bn.



Sentiment going into next week is one of cautious optimism, as the market braces for the F&O expiry and next month's quarterly results. One will also have to factor in what the Federal Reserve has to say on the health of the US economy later this month. India's strong fundamentals are being partly overshadowed by external worries, particularly in Europe. Although some of the concerns over the euro-zone sovereign debt problems have ebbed, there is no guarantee that the newsflow will not turn sour. Also, the key indices have found it tough to break out of these levels in the past. Valuations may also not be too compelling. In a nutshell, the market may consolidate in a sideways fashion for a while before taking out the previous highs.