Weekly Newsletter - Aug 13 2010

Another bright start ended with a whimper for the Indian stocks amid mounting worries over a slowing global economy. The Federal Reserve's move to resume quantitative easing in light of a string of disappointing data points recently stoked fears of a possible double dip. China continues to slow though it is unlikely to confront a hard landing. The euro-zone is showing signs of a comeback, thanks largely to Germany's scorching pace. The UK has been hit due to deep spending cuts. Also, reports suggested fresh trouble in PIIGS, with the ECB apparently having to step in to check volatility in Irish bond market. Japan of course is facing its own set of issues.



Although the global concerns could prove to be exaggerated in the long run the same will intermittently weigh on the markets' psyche. As the tug of war between conflicting viewpoints continues the Indian market could gradually inch higher. It could be a painfully slow progress as has been the case over the past several months. There will be bouts of spurts and slumps but on the whole the current trend of sluggish, rangebound movement may prevail for a while.

FIIs continue to repose faith in the India story and are not expected to flee overnight. On the other hand, a deteriorating external picture could just prompt the RBI to go slow on its tightening spree, though only time will tell if that indeed turns out to be true. Some moderation in inflation could come in handy. The latest monthly inflation will be out on Monday. Amidst all the talk of a global slackness, India may still manage respectable 8-8.5% growth and earnings growth will also be decent if not spectacular.