Weekly Newsletter - June 5 2011

The Indian market continues to witness zigzag movements without any clear bias and sense of direction. It is seeing alternating bouts of buying and selling based on certain news flow. Though FII flows have improved slightly, the influx is still not strong enough to lift the key indices substantially. At the same time, macroeconomic landscape remains challenging and the Centre is still grappling with issues of corruption, leaving policy making in a limbo.



Next week will yet again be a litmus test for the UPA II as the EGoM on fuel prices assembles. Let's hope the meet doesn't get postponed further. But, if it does take place one must brace for a spike in headline inflation in the days to come. The RBI will decide on policy rates on June 16. Before that, the market will react to April IIP data on June 10 and May inflation on June 14. In the meantime, the progress in monsoon will also have a sentimental impact on the market.

Globally, investors are on tenterhooks amid worries about anemic growth in the US economy and lingering concerns over sovereign debt problems in the eurozone. Hopefully, the Greece situation will get resolved over the weekend. On Monday, world markets could head south after the US jobs data came in much below expectations. Interest rate decisions are due next week from the central banks in UK, EU and Australia.

In short, market conditions are not favourable for a secular rally. Things are pretty volatile and uncertain in the short term. There is a general lack of confidence among investors at this juncture. This may take a while to change. So, be vigilant and stick to stock centric approach to avoid major hit in your portfolio. Wait for the market to signal a decisive breakout from the current range before resuming your shopping binge.