Market outlook: Prepare for political and global headwinds

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Market outlook: Prepare for political and global headwinds
Indian markets witnessed a truncated trading week on account of Holi and Good Friday holidays. As we usher in a new week after Easter, get prepared for more volatility, as global and domestic political events take centre stage.

To begin with there are now worries over a conflict on the Korean Peninsula with North Korea threatening strikes aimed at the US and South Korea. Many dismiss this as an empty rhetoric, though nothing can be sure at this stage. Then, there are global worries over Cyprus, which once again has not gone away completely. The good news is that the US economic data continues to remain robust, which is helping the markets there.

Indian markets have been amongst the worst performing ones in recent times. In fact, the quarter ended March 31, 2013 was the worst quarter for the markets since December 2011. In fact, the Jan-March quarter saw the Sensex dropping by 3.04 per cent.

Some of the other BRIC nations also saw a drop in the first quarter of 2013, while developed markets showed more resilience.

The Indian markets are being held hostage to political developments. First, the DMK withdrew support to the government and now the Samajwadi Party is threatening to withdraw support to the government. Investors fear that even if the government does not fall, the reforms process would be stalled as many believe that the government is a lameduck one.

Also, the current account deficit which was reported on Thursday is likely to result in some pressure when markets open on Monday. The CAD which was estimated at around 6.3 per cent, shocked analysts at 6.7 per cent.

It's going to be a choppy few weeks for the markets and investors would do well to exercise caution. At least investing in high beta mid cap stocks at this stage would require a lot of courage.

Read more about: sensex, nifty
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