Weekly Newsletter - July 25 2010

Another sideways-to-rangebound week has gone by, though the main indices did manage to surpass key barriers. Our market was relatively quiet even as global markets witnessed lot of action. Economic reports coming out of Europe were the biggest positive surprise. Global earnings held up pretty well, but a few of them did miss the estimates. Back home, results were mostly in line with expectations and there has not been any major nasty surprise. The earnings outlook for the Indian companies remains bright in line with the prospects for the Indian economy. The PM's Economic Advisory Council has set a target of 8.5% and 9% for the next two years.



Inflation continues to be an issue and may take time to soften. The RBI is expected to continue its calibrated approach to monetary policy. Markets expect the RBI to announce another small hike of 25 basis points at next week's policy review. Volatility might increase slightly owing to the F&O expiry. What is heartening is that FIIs remain upbeat on India and have already pumped in close to US$9bn. So, the broad undertone is positive and the market could gain some more ground from here. But, global uncertainty and high valuations may play spoilsport. Monday's start will partially hinge on the outcome of the European banks' stress tests.