With Fitch downgrading
the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain, Swapnil Suvarna advices caution as any negativity
from the euro-zone will weigh on market sentiment.
The Sensex and Nifty ended the day at 17,234 and 5,205 gaining 495 points and 156 points, respectively, led by RBI’s CRR cut and positive domestic economic data.
The week started on a steady note. However, following RBI’s CRR cut, domestic markets saw an uptrend. This move is expected to ease the liquidity problem faced by banks as it would lead to an infusion of Rs. 320 billion into the banking system.
The markets anticipated some volatility with a cue from investors’ rolled-over positions in the F&O segment from January 2012 series to February 2012 series. Reports that Portugal might require a second bailout and failure of talks between Greece and its private debt holders to write down the debt by 100 billion euro ($129.5 billion) weighed on the market sentiments.
Moreover, the International Monetary Fund (IMF) has sharply cut its 2012 outlook to 3.3% from 4%, due to escalating euro-zone debt crisis which has dragged down the world economy. Negative news continued to impend the domestic markets after Japan lodged its first annual trade deficit in 2011.
However, the market snapped its volatility to end the week on a positive note after the US Federal Reserve pledged to keep US interest rates at ultra-low levels until late 2014.
Week Ahead
Series of positive development in the domestic and global markets will continue to drive the markets on higher volumes. Easing of inflation will prompt the RBI to cut interest rates, which in turn, will revitalize the sagging domestic economic growth.
However, we suggest your clients to remain cautious as the euro-zone is still susceptible to monetary and financial distress. Fitch has downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain.
