Weekly Newsletter - May 20 2011

The announcement of the higher oil subsidy burden for state-run upstream companies partly marred the mood. But, the overall sentiment did receive a slight boost from L&T's results and drop in food inflation in early May. ITC results failed to impress though. Recovery in global stock equities and moderation in the commodity complex supported the Indian markets.

In the coming week, the focus will on the F&O expiry. The market may gain some more ground, provided overseas cues are supportive and results from the likes of Tata Motors, Tata Steel, M&M and Coal India don't sour the mood. Keep an eye on FII flows as well to see if the offshore investors have turned buyers again. Expect some resistance at higher levels.

Although the market could rise slightly from here on, it will be mostly a short covering led bounce. On the whole, the market is suffering from a general lack of interest from large investors. Traders too are caught in a bind amid lack of clarity on the direction of the markets. The near-term outlook remains uncertain amid worries over inflation and its implications for monetary policy.