Turnaround at start!

Obstacles don't have to stop you. If you run into a wall, don't turn around and give up. Figure out how to climb it, go through it, or work around it. - Michael Jordan.

The Nifty has quickly lost altitude after soaring past 5600 and is now hovering around 5300 levels. Tuesday’s turnaround may be visible at start as the indices could regain some lost ground. The undertone is likely to remain jittery though due to a number of factors.

High crude oil price is one of them. Already there are reports of an impending fuel price hike post state elections. That will, in turn push up inflation, possibly deferring a rate cut by the RBI. Liquidity continues to be tight and could get worse mid-March due to the advance tax outgo.



The RBI holds its next policy meeting on March 15, a day before the Union Budget. The budget session will kick off on March 12. Election results will be out on March 6. IIP for January will be released on March 12 while February inflation is due on March 14.

The release of Q3 GDP data is scheduled for Feb. 29. It is likely to show further drop in economic growth. The outcome of the second LTRO by the ECB will also be keenly watched across the globe on Wednesday.

In short, the market could test your patience in the short term. For now, remain extremely cautious while trading in small-caps and mid-caps. Wait a little longer and buy into the weakness.

Despite four days of losses, FII flows continue to be positive. On the other hand, global markets seem to have lost bit of momentum amid rising oil prices and escalating geopolitical tension. Also, concerns prevail over the eurozone debt crisis and China's slowing growth. Some people are also skeptical about the recovery in the US economy.

The Nifty has closed below the support of 20 DMA (~5375). The daily RSI is around the support zone of 60. The Nifty could take support at 5200. There could be more weakness below 5200. Any fresh upmove from here on will hinge on FII flows, trend in global markets and domestic policy announcements.

Trend in FII flows: The FIIs were net buyers of Rs 3.29bn in the cash segment on Monday while the domestic institutional investors (DIIs) were net sellers at Rs 6.99bn, as per the provisional figures released by the NSE.

The FIIs were net sellers of Rs 12.74bn in the F&O segment on Monday, according to the provisional NSE data.

The foreign funds were net buyers of Rs 75.98bn in the cash segment on Friday (Feb. 24), as per SEBI web site. The Mutual Funds were net buyers of ~Rs 7bn in the cash segment on the same day.

Global Data Watch: Japan's retail sales, Germany Gfk consumer confidence survey, eurozone consumer confidence, Germany CPI data, US durable goods orders, US home prices, US consumer confidence and US Richmond Fed manufacturing index.

Asian Markets on Tuesday:

Asian markets were trading mixed as investors digested a plethora of news - economic as well as corporate. Japanese stocks were down after Elpida Memory filed for bankruptcy protection. On the other hand, shares in China and Hong Kong were trading slightly up.

The MSCI Asia Pacific Index was virtually static at 127.36 as of 10:53 am in Tokyo. Three stocks fell for every two that rose. It is set to end a 10-week winning streak, the longest such run of gains since its inception in 1988.

The index had posted its biggest monthly advance last month since September 2010.

The Nikkei in Japan was down ~0.6% at 9,579. The Shanghai Composite index in China was up ~0.1% at 2,449. The Hang Seng in Hong Kong was up 0.6% at 21,343.

The Straits Times in Singapore was up ~0.3% at 2,954 while the Kospi in South Korea was up ~0.2% at 1,995. The S&P/ASX 200 index in Australia was flat at 4,264.

Elpida Memory Inc. filed for bankruptcy protection after a plunge in semiconductor prices and its inability to get new financing. Elpida Memory's bankruptcy filing is the biggest in Japan in two years.

The last Japanese maker of computer-memory chips filed for bankruptcy protection with more than US$5bn in liabilities.

Chinese banks climbed after a report they will be allowed to lend to local governments for partially completed projects.

The yen strengthened. Oil prices declined and South Korea’s won advanced. The Australian and New Zealand dollars fell for a second day versus the yen on concern that Greece will struggle to contain its debt load.

The yen climbed against the euro for a second day after Standard & Poor’s cut Greece’s credit rating to "Selective Default".

The Japanese currency also rose versus the greenback. The euro's losses against the dollar were limited as the European Central Bank (ECB) prepares to allot a second round of unlimited three-year funds to help shore up the region’s banks tomorrow.

S&P lowered Greece’s credit grade from CC, two levels above default. The downgrade follows a reduction last week by Fitch Ratings to 'C', while Moody’s Investors Service has said it will cut the nation to its lowest rating.

Separately, Germany’s Chancellor Angela Merkel won a parliamentary vote on a 130 billion-euro ($174 billion) bailout for Greece.

The parliaments of Finland and the Netherlands plan to vote on the same aid package tomorrow. Italy’s parliament is the only other euro-member national legislature that still needs to give its approval.

US Markets on Monday:

US stock indices finished mostly unchanged on Monday but recovered from session lows as an upbeat housing report countered worries about the debt crisis in Europe and rising gas prices. The Dow industrials closed below 13,000.

The Dow Jones Industrial Average declined 1.44 points to close at 12,981.51. The index rose as high as 13,027.52, reversing a fall to 12,882.59 before the housing data.

The Standard & Poor’s 500 Index advanced 1.85 points, or 0.1%, to close at 1,367.59, while the Nasdaq Composite Index added 2.41 points, or 0.1%, to close at 2,966.16. Financial stocks led the S&P 500 higher, followed by consumer discretionary.

The S&P had closed on Friday at its highest levels since June 2008.

The last time the Dow closed above 13,000 was May 19, 2008, when it ended the day at 13,028.16. The first ever time the Dow closed above 13,000 was on April 25, 2007.

Monday was the second instance when the Dow breached 13,000 intraday and then closed under the psychological mark.

About 3.5 billion shares traded hands in NYSE composite trading with 54.1% of the volume advancing. Composite Nasdaq trading was around 1.7 billion shares with 54.9% of the volume advancing.

The US dollar pared gains against the euro after Germany’s parliament backed the next bailout package for Greece. The euro, which touched a three-month high against the greenback last week, fell to $1.3394 compared with $1.3462 late on Friday.

Crude oil futures eased after climbing above $109 a barrel Friday. Oil for April delivery slipped $1.21 to settle at $108.56 a barrel.

Oil prices have risen recently on heightened tension with Iran, translating into higher prices for gasoline in the United States.

Gold futures for April delivery fell $1.50 to end at $1,774.90 an ounce.

The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 1.92% from 1.98% late on Friday.

Global finance ministers said over the weekend that European Union leaders need to strengthen their financial firewall before other nations will back more money for the International Monetary Fund (IMF).

G-20 officials indicated they won’t move until European leaders take action to boost the size of rescue funds to provide a firewall against the spread of the eurozone debt crisis.

Meanwhile, the German Parliament approved the nation's contribution to a second €130 billion bailout for Greece, as expected. Finland and the Netherlands are also expected to back the bailout this week.

The National Association of Realtors said that pending home sales rose 2% in January to 97. It was the highest reading since April 2010, when the index reached 111.3, as buyers were rushing to take advantage of the home buyer tax credit.

The housing index, which measures home sales that are in contract but have not closed, was expected to have risen by 1%, according to economists.

Priceline.com reported quarterly earnings that beat analysts' expectations, sending shares up 4% after the market closed.

The hotel reservation website fronted by William Shatner earned $5.37 per share in the fourth quarter, up from $3.40 a share in the same period last year. Analysts were expecting $5.05 per share.

Lowe’s Cos. shares edged up after the home-improvement retailer reported a fourth-quarter profit a little higher than analysts polled by FactSet Research expected the company to earn. Lowe's also issued healthy guidance for 2012.

Transocean booked a $6.1 billion loss, mostly on one-time charges including a $1 billion estimated loss on the 2010 spill at its Deepwater Horizon rig in the Gulf of Mexico. But shares of the company rose as revenue climbed 11% during the quarter and topped expectations.

Motorola Solutions said that it bought back $1.2 billion in stock from activist investor Carl Icahn and affiliates. As part of the transaction, Vincent J. Intrieri, a director of Icahn Enterprises G.P., agreed to resign from the Motorola Solutions' board of directors.

US-listed shares of Nokia fell 6.2%. Earlier in the day, the company unveiled two new versions of its smartphones in the Lumia range at the Mobile World Congress in Barcelona, Spain.

European Markets on Monday:

European markets finished lower on Monday after G-20 finance ministers refused to add more heft to the IMF resources and instead pressured eurozone leaders to boost the region’s bailout fund.

The European indices pared losses after the release of stronger-than-expected US home sales data.

The Stoxx Europe 600 lost 0.3% to end at 263.86 after trading as low as 261.62 earlier in the session.

The DAX 30 index slid 0.2% to 6,849.60. The French CAC 40 index was down 0.7% at 3,441.45. The UK's FTSE 100 index dropped 0.3% to 5,915.55. The FTSE MIB Italy index fell 1.1% to 16,308.60.

The G20 officials gathered in Mexico over the weekend and said they will support adding more funds to the IMF only if the eurozone contributes more money towards its rescue funds.

Germany's parliament approved the 130 billion euro ($174 billion) bailout for Greece. The Bundestag approved the plan, which was agreed by eurozone finance ministers last week, in a 496-to-90 vote, with five abstentions.

That gives German Chancellor Angela Merkel permission to back the bailout when European Union leaders gather later this week at a summit meeting to formally approve the package.

Separately, Italy's government sold 8.75 billion euros of six-month bills, as short-term borrowing costs declined. Still, the yield on Italy’s 10-year government bond rose 2 basis points to 5.41%.

Shares of Lloyds Banking Group and Royal Bank of Scotland Group were down after a newspaper reported that those banks will likely tap a combined €15 billion ($20.2 billion) in the European Central Bank’s long-term refinancing operation on Wednesday.

Shares of HSBC fell after reporting 2011 pretax profit rose 15% to $21.9 billion, which was just below a forecast of $22.2 billion from analysts. That profit also included a $3.9 billion gain from the value of its own debt.

BP shares rose after reports said that the oil group is negotiating a $14 billion settlement of claims related to the 2010 Gulf of Mexico oil spill.

BP said in a statement on Sunday that a trial set to begin on Monday has been delayed by the US District Court in New Orleans to give both sides time to reach a deal.

Essar Energy shares sank after reporting it swung to a $881.1 million pre-tax loss in 2011.

Shares of Nokia slumped more than 6%. The company announced two new smartphones in the Lumia range at the Mobile World Congress in Barcelona.