Bear the burden!

People become attached to their burdens sometimes more than the burdens are attached to them. ~George Bernard Shaw.

The prophets of doom seem to be having their way. Panic seems to have got the better of market players globally, as policymakers in the US and Europe struggle to stem mounting fears of double-dip recession. The cuts have been absolutely brutal. What’s worse, the mayhem may not be over yet.

Risky assets have few takers while safe havens are being lapped up like there is no tomorrow. Gold is also being shunned as the dollar is strengthening. EM currencies have been butchered. The rupee has taken a big tumble, hitting a 28-month low. This erodes returns on Indian stocks for the FIIs.

Is this carnage overdone or will there be more pain? The answer is hard to come by at this stage. One must adopt a ‘wait-and-see’ approach.

The start looks to be weak again as ‘western markets’ suffered further damage and Asian indices have not recovered. We do not rule out a ‘corrective’ rebound but be careful as volatility will remain elevated. We advise caution if the Nifty stays below 4900.

The good thing for the Indian economy and markets is that commodity prices are softening. If global energy and material prices remain reasonably low we could see inflation coming down, which in turn might prompt the RBI to end its tightening.

FIIs were net sellers of Rs 13.05bn in the cash segment on Thursday, according to the provisional NSE data. The domestic institutional institutions (DIIs) were net buyers at Rs 7.43bn on the same day.

FIIs were net buyers of Rs 5.16bn (provisional) in the F&O segment.

The foreign funds were net buyers of Rs 3.33bn in the cash segment on Wednesday, as per SEBI data. Mutual Funds were net buyers at Rs 2.16bn on the same day.

Global Events To Watch: G-20 Meeting and ECB president Trichet's Speech.