Weekly Newsletter - Jan 23 2011

After a two-week drubbing, the market managed to claw its way back somewhat but the undertone is still fragile in the face of concerns over near-term headwinds like FII outflows, governance deficit, economic slowdown and high inflation. Results have started pouring in but are mostly in line with estimates. As always, there have been a few positive surprises and a few nasty ones as well. Globally, things appear to be more or less quiet with global indices continuing their outperformance vis-à-vis India.



Next week will be an interesting one and a truncated one as well. The RBI policy review on Jan. 25 is going to be a crucial event for the markets. The central bank is widely expected to push up key policy rate(s) by 25 basis points. One has to see if it also announces any new measures to tackle the liquidity crunch. Then there is the F&O expiry, which will result in increased volatility. On the whole, the sentiment remains precarious as the key indices could fall further from here.

The 200-DMA (5610) is the level everyone is watching closely on the Nifty. A break below this level might see some more selling before the mood perks up again. At the same time, any rise is likely to meet with resistance. So, brace yourself for a rough ride as making money is likely to be a bit more tricky for a while to come.

Apart from a whole host of important domestic results, the global events to watch out for include interest rate decisions by the Federal Reserve and the BOJ, US home price index, durable goods orders, consumer sentiment index, pending home sales, and US and UK Q4 GDP.