Suddenly things turned in favour of bulls. Atleast the press and US markets are trying to portray a brighter picture. Over the week end couple of regulators tried to pump bullish strength. Here are a few
1. Euro crisis may trigger more capital flows into India: RBI
Our Take : While there is absolutely no doubt that Indian market will lead the rally from the front, when the world is burning it is pre-mature to talk about inflows and that too when last month's data clearly show outflows from FIIs due to a strong dollar. Dollar strength is a major concern for emerging economies atleast in the short term when it comes to inflows.
2. Markets exaggerating euro zone risks: ECB policymakers
Our Take : That is a funny statement indeed. We believe markets are correct given the underlying macro and micro economic issues in many small European nations. Euro is likely to get even with US Dollar if the crisis continues. Watch out for unwinding of major economic issues in the EU soon.
Bottomline is when the world is burning no one will dare invest in equities. Coming to Indian economic picture Industrial numbers were stunning but bears have a cause here. RBI might raise rates before the july meet itself.
Infact RBI is in a catch-22 situation whether to raise rates or hold on and watch how the Euro crisis plays. While the first action will slow down growth, the second one will trigger massive inflation. Let us see how Mr.Subba Rao handles the situation,
We still believe 4750 will be tested on Nifty before any upmove. On the flip side we will go long with Nifty above 5250 levels