Quiet consolidation before Budget

Belief like any other moving body follows the path of least resistance. - Samuel Butler.

The Indian market seems to have hit the consolidation path post the big pull-back we have had recently. We are in a trading range for a few days leading up to the Budget. Decisive moves are expected next week due to the F&O expiry and the Union Budget. Also, the latest GDP figures will be out next week. We expect another soft start and perhaps another day of intraday churning within a tight trading band. Watch out for the weekly inflation data around noon.



Although we have recovered smartly after a three-week drubbing, doubts still persist about the continuation of the rally. The current consolidation may continue for a few days before the move towards 5690. What happens after that is anybody’s guess. So, be careful and tread cautiously even as the bias remains positive for now.

The PM’s media interaction largely leaves a lot to be desired as far as tackling corruption is concerned. But, he has promised action on this front and on reforms in the coming days. In this context, the Budget is being seen as an important event.

We have to see what steps the Government takes to bolster public confidence and revive its sagging fortunes. Whether the Centre obliges the Opposition and sets up a JPC also remains to be seen even as the daily dose of news on CBI probe into the 2G scam is not doing any good to the market sentiment.

Meanwhile, the FY11 disinvestment target may not be met as the Centre has deferred SAIL FPO after postponing the FPOs of IOC and Hindustan Copper. All eyes are on the ONGC FPO.

On the other hand, we have seen a steady improvement in the global economic landscape. In fact, the US Fed has just upped the GDP forecast for 2011. We are seeing some shift in global liquidity from emerging markets to the matured markets. QE2 has of course played a role in lifting global equities and commodities. One has to see when the central banks in the developed world, especially in the US start jacking up rates.

FAG Bearings and Thomas Cook India will declare their results today.

FIIs were net sellers of Rs 2.3bn in the cash segment on Wednesday, according to the provisional NSE data. The domestic institutional institutions were net sellers at Rs 684.9mn. FIIs were net buyers of Rs 8.16bn in the F&O segment.