Tell me why?

Human reason is like a drunken man on horseback; set it up on one side, and it tumbles over on the other - Luther.

Nothing unexpectedly earthshaking has happened in recent times but the bulls are feeling the earth move below their feet. FIIs seem to be increasing their withdrawals after pumping in a record US $29bn last year. The only thing that seems to be adding up is fears of inflation.



After taking a pause in December, the RBI is most likely to push up policy rates at its Jan. 25 meeting. None of the above two reasons should surprise the markets but the undertone has been marred by the continuity and enormity of the selloff.

The silver lining is that the main indices appear to be a bit oversold. Some sort of a technical pull-back is always on the cards. Its not yet time to take a directional call though. We see a cautious opening but like Monday one might see an extension of the previous session’s fall before a recovery, if any.

While the medium- to long-term prospects remain upbeat for India, the markets will have to negotiate a few near-term headwinds.

US stocks closed mixed as investors await quarterly earnings. European shares were down amid persistent sovereign debt worries. Asian markets are mixed this morning.

The European Central Bank (ECB) has reportedly lent Portugal a temporary lifeline by buying up its bonds amid growing fears over a potential bailout of the debt-stricken eurozone nation.

Meanwhile, the Euro hit a four-month low against the dollar on Monday, as speculation increased that Portugal was all set to follow Ireland and Greece in seeking a rescue in order to better service its debt pile. The euro has recovered slightly in Asian trading today.

US aluminium giant Alcoa has posted its strongest earnings in two years. Alcoa swung to a profit in the latest quarter, while predicting a doubling of global demand for aluminum by 2020.

Coming back to the Indian markets, the next intermediate support for the Nifty is seen around 5725 as the rising channel has been violated on a closing basis; below this point selling pressure could get accentuated. In case of persistent weakness, there is a chance of the Nifty testing recent intermediate lows around 5700. One has to see what is in store for the bulls if that level is broken. The 200-DMA for the Nifty is at 5596.

FIIs were net sellers of Rs 11.38bn in the cash segment on Monday, according to the provisional NSE data. The domestic institutional institutions were net buyers at Rs 10.18bn. FIIs were net buyers of Rs 20bn in the F&O segment on Monday. The foreign funds were net sellers of Rs 9.65bn in the cash segment on Friday, according to the SEBI web site. Mutual Funds were net buyers at Rs 5.35bn on the same day.