Weakness in sentiment!

He who establishes his argument by noise and command, shows that his reason is weak. – Montaigne.

As anticipated, the Fed has taken a first step toward easing monetary conditions further in a bid to shore up growth of the sluggish US economy. It also left key rates unchanged near record lows. Wall Street recovered from session lows to end slightly lower. Markets in Asia are mixed, with stocks in Tokyo down and benchmarks in Hong Kong and China rising. European markets ended lower.



Meanwhile, US President Obama has signed an US$26 billion jobs bill which will help protect and save jobs in the US. Some impact could be felt on IT counters though industry voices term President’s statements on outsourcing as mere political rhetoric.

We expect another lackluster start on Indian bourses. The movement during the rest of the session will hinge on emerging trends in global markets. Money flows are not an issue for India nor is economic growth. But, high inflation sure is. Part of that problem may start easing a little with improved rainfall this monsoon season.

Among the other factor that could limit near-term upside is high valuations of large caps. No major crash is on the horizon unless we get a series of bad news from abroad. Nifty could see 5500 shortly but more gains may be capped at around 5550. Immediate support exists at around 5420-5430 and at 5370-5380. In case of even further slide, 5300 should act as a big support.

Results Today: Bajaj Hindusthan, Bharti Airtel, Bosch India, Everonn, FT, Nitesh Estates, Parsvnath Developers, Sundram Fasteners and Videocon Industries.

Against a backdrop of disappointing US economic reports, global investors moved their cash into emerging markets funds in early August, as they sought protection from anticipated weakness in the dollar, says EPFR Global. Flows into EPFR Global-tracked emerging markets equity funds hit a 38-week high during the seven days ending August 4, the US-based firm adds.

Overall, investors steered $5.32 billion into EPFR Global-tracked equity funds, with emerging markets funds accounting for over three-quarters of that total, and committed $4.12 billion to bond funds, says EPFR global. Money Market Funds posted inflows for the second straight week, the first time they have done so since early January, it adds.

FIIs were net buyers of Rs6bn in the cash segment on Tuesday (provisionally), according to the NSE web site. Local funds were net sellers of Rs5.4bn. In the F&O segment, they were net buyers at Rs1.5bn. Foreign funds were net buyers of Rs586mn in the cash segment on Monday, according to SEBI's web site.