Weekly Newsletter - Feb 25 2012

We warned about a meaningful correction on Feb. 22. Incidentally, the main indices witnessed second big fall of 2012 on the day. Not only that, the Indian market broke its seven-week winning streak this week. The frontline indices fell for three straight days and logged their first down week of 2012. Traders preferred to book profits in the run up to important domestic events next month.

The fall this week may not necessarily be a bad thing. A pause is always healthy after such a rise. For those who missed the rally, such corrections could be a blessing in disguise. The Indian market could consolidate in a sideways fashion in the near term as uncertainties over the European debt crisis and geopolitical tensions persist.

One should keep a close eye on FII flows, which have been quite robust so far. Q3 GDP data and LTRO-2 by the ECB will among the events to keep on one’s radar for next week. The Centre must not lose any time in accelerating reforms. That will in turn become fuel for our markets.