Will the bearish trend prevail next week?

Business

oi-Sunil

By Sunil Fernandes

Published: Saturday, March 24, 2012, 12:35 [IST]

After five successive week of declines, bears have gained the upper hand, with the intermediate trend looking more steady to negative for the markets. With all policy decisions now behind, including the Union Budget, Monetary Policy Review and the Railway Budget, markets are expected to take cues from global developments.

Foreign funds continue to be net buyers on the Indian bourses, thanks to a surge in global liquidity. The markets will continue to gain, as long as this liquidity gush continues. Even on Thursday, FIIs had bought in excess of Rs 600 crores in net investments, with the figure for Friday not yet collated. The second round of LTRO (long term refinancing operations) by the European Central Bank has ensured that there is a new wave of liquidity, which finds its way into emerging markets like India.

Markets likely to be range bound
Despite the five consecutive week fall, markets are not expected to fall dramatically from here and are likely to be more range bound on account of the strong liquidity. The next important determinant for the markets would be the April Monetary Policy Review.

A repo rate cut by the RBI in the Monetary Policy Review might help perk sentiments. However, if a status-quo is maintained it is likely to disappoint the markets.

One of the biggest factors that will play up is crude oil. If crude oil continues to rise, it is likely to weaken the Indian fundamentals, including the current account deficit and fiscal deficit, while spiking inflation. These factors can lead to a large sell-off in stocks from foreign funds.

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