Weekly Newsletter - Feb 5 2011

Another tumultuous week is behind us but the pain may linger for a while before we get a major relief. In fact, the week could have ended much better if it wasn't for Friday's ferocious fall. Before Friday, the market was evenly poised and it looked like we were in for a small rebound after the recent mayhem. But a massive selloff on Friday dented all the hopes.



Next week will begin with a bitter aftertaste of Friday's selloff. The sentiment has taken a beating and will take time to heal. What perhaps could perk up the mood is the fact that both FIIs and DIIs were net buyers in Friday's session. So, who and what led to the sharp selloff?

The positive institutional buying is encouraging but one has to see whether this trend sustains for long. Technically, 5350 is a crucial level and the Nifty is likely to rebound from there. On the flip side, a break below 5350 might hit the sentiment further.

European markets were trading higher ahead of the monthly US jobs data. Unemployment is still pretty high in the US and remains one of the biggest worries for policymakers. It is not likely to improve materially for some time to come. The number of new jobs added every month will continue to show a steady improvement though.

Next week is light on global data points while back home the markets will have to grapple with advance GDP estimates for FY11 (Monday) and the latest IIP numbers (Friday). We are going through tough times after a two-year rally. This is a healthy correction and should be used to pick up quality stocks for medium to long term investment. The near-term prospects will hinge on how the Government tackles some of the macro-economic headwinds.