Indices standing still!

Be not afraid of growing slowly, be afraid only of standing still.- Chinese Proverb.

The Nifty came tantalizingly close to breaking below its 200-DMA recently but managed to rebound on the back of steady FII inflows. However, the threat of the main indices slipping below the key technical barrier remains in place.

In the meantime, the rupee has suffered a fresh setback amid concerns about elevated oil prices and its impact on India’s external account. FII inflows have been fairly solid throughout this year owing to easy money policies being pursued by central banks in the developed world. But, doubts persist regarding the sustainability of this trend going forward.



So, while liquidity could remain supportive for a while the macro-economic picture remains a bit of a worry. Globally, slowdown is visible across the world, including China. On the domestic front, the worries are all too familiar – sticky inflation, high interest rates, swelling twin deficits and policy impasse.

We see a slightly lower start today. Asian markets are mixed and struggling for direction. US stock indices managed modest gains on Friday. European benchmarks finished higher on Friday.

Trading this week will be choppy due to the F&O expiry. Keep a close eye on the rupee and crude oil. Also watch out for the Government’s borrowing calendar for H1 FY13.

Investors should stick to a defensive strategy for the time being given the uncertainties over a whole host of macro-economic factors - both domestic and global. The main equity benchmarks might correct in case there is no rate cut on April 17. Already, the extent of the RBI's rate cuts for FY13 has been scaled back post the Union Budget. Indian markets will also take their cue for the short-term movement from the Government's borrowing calendar for the first half of FY13.

The Nifty continues to face sustained selling pressure above 5300 levels, which has led to it notching a five-week losing streak after seven straight weeks of stellar rally. The break down levels for the ongoing consolidation is seen at 5190; below which the undertone could bearish.

Trend in FII flows: The FIIs were net buyers of Rs 94.6mn in the cash segment on Friday while the domestic institutional investors (DIIs) were net buyers of Rs 1.86bn, as per the provisional figures released by the NSE.

The FIIs were net buyers of Rs 20.35bn in the F&O segment on Friday, according to the provisional NSE data.

Global Data Watch today: US pending home sales, Federal Reserve Chairman Ben Bernanke's speech, ECB president Draghi's speech and Germany's IFO business sentiment index.