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Wednesday, August 18, 2010

Thank God for inconsistency!



With consistency a great soul has simply nothing to do. – RW Emerson.

Markets seem to be just reacting to daily dose of news, which fortunately or unfortunately is not consistent. So, if one day news flow is upbeat, on other days it is not so encouraging. Strangely, volatility is not all that elevated even as markets are looking for fresh catalysts to make decisive moves.

Overall, the global outlook remains uncertain with the US seeing lackluster progress, the Eurozone still not out of woods over sovereign debt issues and China gradually slowing down. The UK is dealing with twin problems of high inflation and tepid growth. Japan of course remains mired in deflation.

For India, the broad picture is bright and beautiful. Although growth does appear to have moderated slightly, fresh traction is expected in the coming months.

We expect a positive start on the back of strength in most global markets. The main indices are unlikely to witness sharp gains unless the global rally sustains for long. Non-index counters will remain abuzz but as always, let caution prevail.

Technically, the NSE Nifty is likely to find support at 5400 and at 5370 while the near-term resistance zone is around 5480. The Nifty has been struggling to cross 5500 but will need a big help from global market if it is to breach that milestone in this month. It may rise as high as 5600 on short covering led gains if it does manage to cross 5500. However, the big question is whether it can maintain the tempo beyond that level as the global situation remains precarious.

Lots of global data points are due to be released throughout the week and will have some bearing on the global sentiment. UK will release data on retail sales. Data on CPI, along with a housing report is due in the US. The latest monthly balance of payments figures for the eurozone are due to be announced by the European Central Bank. Australia will go to the polls on August 21.

Results from several big companies in the US, Europe and elsewhere will also be announced this week. Technology giants Hewlett-Packard and Dell will release their results this week.

FIIs were net buyers of Rs4bn in the cash segment on Tuesday (provisionally), according to the NSE web site. Local funds were net sellers of Rs4bn. In the F&O segment, they were net buyers at Rs10.53bn. Foreign funds were net buyers of Rs5.58bn in the cash segment on Monday, according to SEBI's web site.