This week too, Indian
markets will continue its downtrend; Swapnil Suvarna suggests those with spare
cash could make fresh investments in good quality equity schemes to take
advantage of the attractive valuations.
As
expected, the Sensex and Nifty ended the week at 16,142 and 4,846 declining 698
and 227 points respectively amid foreign institutional selling following signs
of a sharp slowdown in global economy.
The
week started off on a negative note following a report that Germany’s economy
grew 0.1% during the second quarter which was weaker-than-expected. The meeting
between German Chancellor Angela Merkel and French President Nicolas Sarkozy
failed to subdue fears about Euro-zone leaders’ ability to contain the
sovereign debt woes. These developments raised concerns on the global growth
and profit outlook of the US banks.
As
per government data, food inflation rose 9.03% and the fuel price index rose to
13.13% as compared to the previous week data where annual food and fuel
inflation stood at 9.90% and 12.19% respectively. This news led to further
selling by foreign funds on concerns that rising inflation would prompt the
central bank to hike rates which in turn would restrict the corporate profits.
Week Ahead
We
expect the domestic markets to continue its downtrend on fears that US and
Europe are close to recession. Investors will be closely watching the economic
data from the US and the health of banks in Europe.
Also inflation is not showing any sign of deceleration which could prompt the Indian central bank to continue hike rate at its monetary policy review on 16 September. However, we could witness short spells of rally due to smart bargain buying by institutional investors. During this bearish phase, suggest your clients to make fresh investments in good quality equity schemes to take advantage of the attractive valuations.
