Avoiding mid-week crisis!

I am not an adventurer by choice but by fate. - Vincent van Gogh.

After a five-day rout, investors may feel adventurous this morning as the Indian market could see a much-needed relief rally. World markets, especially in the US, have ignored the political turmoil in Egypt with the Dow breaching 12,000. Other global markets have also been stable to positive amid growing optimism about the ongoing recovery in the US and elsewhere.



Unfortunately, the Indian market hasn’t benefited from the global rally in recent times. On the contrary, India has lost quite a bit of ground, with the key indices dropping below 200-DMA. Inflation has been the biggest bugbear for India, along with policy paralysis. FIIs have latched on to some of these negatives to pull out $1bn in January.

All eyes will be on the forthcoming Union Budget. There have been mere murmurs of a few bold steps being considered for the Budget. If that does happen we might see some semblance of recovery. But, more importantly inflation has to soften and the Government must act on crucial reforms.

FII flows will continue to be the critical variable for the Indian markets. Monthly auto sales, trade data and manufacturing PMI show that the Indian economy remains in the pink of health. Also, manufacturing PMI data from around the world has been very encouraging. Watch out for the US monthly jobs data that will be out on Friday.

The Nifty could well crack further. So, don't get trapped in a dad-cat bounce. Another fall of ~5-7% will definitely make the Indian market attractive from a medium to long-term perspective. For the Nifty, 5350 is likely to act as a good support base while resistance is expected to kick in at 5550-5600. For the Nifty, cluster of previous top support are at 5347. It also corresponds to 61.8% Fibonacci levels.

Results Today: Bharti Airtel, GSK Consumer, Great Offshore, Hero Honda, ICRA, Infinite Computers, Jai Corp, Jet Airways, SJVN, Taj GVK Hotels, TTK Healthcare, Voltas and Wockhardt.

FIIs were net sellers of Rs 10.36bn in the cash segment on Tuesday, according to the provisional NSE data. The domestic institutional institutions were net buyers at Rs 6.3bn. FIIs were net buyers of Rs 17.35bn in the F&O segment. The foreign funds were net sellers of Rs 9bn in the cash segment on Monday, according to the SEBI web site.