New-year rally under threat!

"Those that are the loudest in their threats are the weakest in their actions." Charles Caleb Colton.

The new year rally could be in danger, as the Iran-linked worries mount and Greece struggles to get much-needed aid amid fears of default. The start today is likely to be lower due to weakness in US and Asian markets. European stocks too came off session highs amid escalating geopolitical tensions and lingering concerns over Greece.

Crude prices have climbed on worries about possible supply disruptions. The euro slid to a one-week low despite encouraging comments from China’s central bank chief. Wall Street appeared to be disappointed by lack of consensus on QE3 among Federal Reserve officials.



The bad news apart, not many would have predicted a sharp and swift turnaround in sentiment at the start of the year. But, markets always find a way of surprising participants - the way they have done in the past one and a half months. Emerging markets, especially those in Asia, seem to be faring better than others. Indian indices have hit six-month highs on growing hope of a rate cut in the coming days.

A few positive measures taken by the Government lately have also gone down well with the markets. All eyes are now going to be on the outcome of the Uttar Pradesh elections and the Union Budget.

A lot of people, who have missed the rally, could be forgiven for feeling a bit aggrieved. The question is: is this buoyancy sustainable? The speed and size of the FII inflows suggest the rally could have some more steam. But, the macro-economic fundamentals and global problems signal something else. So, one must exercise restraint at this juncture and avoid undue temptations.

GSK Pharma, REC and Thomas Cook India will announce their results today.

Sasken Communications Board will consider Buy Back of Shares.

Trend in FII flows: The FIIs were net buyers of Rs 18.38bn in the cash segment on Wednesday while the domestic institutional investors (DIIs) were net sellers at Rs 3.13bn, as per the provisional figures released by the NSE.

The FIIs were net buyers of Rs 16.5bn in the F&O segment on Wednesday, according to the provisional NSE data.

The foreign funds were net buyers of Rs 11.46bn in the cash segment on Tuesday, as per SEBI web site. The Mutual Funds were net buyers of Rs 523mn in the cash segment on the same day.

Global Data Watch: UK consumer confidence, Australia unemployment rate, ECB monthly report, US building permits, US housing starts, US weekly jobless claims, US PPI, Philadelphia Fed Manufacturing Survey (Feb) and speech by Federal Reserve chairman Ben Bernanke.