Standing up to challenges!

Challenges are gifts that force us to search for a new center of gravity. Don't fight them. Just find a different way to stand. – Oprah Winfrey.

Challenges abound for the government and the market. The political temperature has been soaring lately amid a howl of protests by the so-called civil rights activists against corruption in high places. At the same time, the weather God seems to be playing hide-and-seek.

There has been a lull in the market as well, with the key indices hovering in a narrow trading band. Traded volumes have tapered off substantially, reflecting a general lack of interest among market players. This lackluster trend may persist for a while before there is any material improvement in sentiment.

Today might not be any different. The start is likely to be muted in the wake of yet another day of losses for the world markets. Wall Street extended the losing streak to six days following a bleak assessment of the US economy by Ben Bernanke. Europe continues to be haunted by the Greek situation. Asian stocks are mostly in the red as well.

One needs to exercise some caution as long as the Nifty trades below 5560. On the way down, any close below 5500 could take the Nifty towards 5430 levels. The non-index counters have been witnessing relatively better action in recent days and could continue to be in the spotlight as investors shy away from the Large-Cap shares. However, stick to quality stocks with sound fundamentals and a good track record on earnings.

FII inflows have eased off in the past few days. FIIs were net buyers of just Rs 504.3mn in the cash segment on Wednesday, according to the provisional NSE data. The domestic institutional institutions (DIIs) were net buyers at Rs 854.7mn on the same day. In the F&O segment, the foreign funds were net buyers at Rs 1.16bn.

The foreign funds were net buyers of Rs 363mn in the cash segment on Tuesday, as per SEBI web site. Mutual funds were net buyers of Rs 271mn on the same day.

OPEC failed to agree on new crude production quotas for the first time in at least 20 years after six countries opposed a Saudi Arabian push to increase supply as oil trades above $100 a barrel. Oil rose for a third day in New York after the OPEC announcement. US crude inventories fell more than analysts forecast.

The policymakers at the Bank of England (BOE) and the European Central Bank (ECB) will meet later today to review the interest rates.

Meanwhile, Brazil has raised its key interest rate to 12.25% after inflation exceeded the central bank's target. New Zealand's central bank has kept its key rate unchanged at 2.5% to boost economic recovery. The New Zealand dollar climbed toward a record after the central bank said that rates will rise within two years.

The Bank of Korea will weigh an interest-rate increase on Friday as swelling household debt and weakness in the global economy pose threats to growth.

The euro climbed toward a one-month high versus the dollar on speculation that the ECB President Jean-Claude Trichet will today signal that policy makers are likely to raise interest rates next month.

The pound weakened against the dollar and the yen after Moody’s Investors Service said that the UK’s "AAA" credit rating may be at risk should the government miss its debt-reduction targets amid slowing growth.

Federal Reserve Chairman Ben S. Bernanke said that the frustratingly slow US recovery warrants sustained monetary stimulus while predicting that growth will gain traction in the second half of the year.

"The economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed," Bernanke said yesterday in a speech in Atlanta. The Fed will take whatever actions are necessary to keep inflation well controlled, he added.