Sensex and Nifty
register sharp decline during the week. Swapnil Suvarna expects the markets to
continue downfall until the global economy outlook shows signs of positive
developments.
As
expected, last week the Indian markets remained weak and ended up witnessing a
sharp decline following weak global cues. The Sensex and Nifty ended the week
at 16,162 and 4,868 respectively, declining sharply by 772 and 217 points each.
The
week started off on a negative note following worries over the swelling debt
crisis in euro-zone after a meeting of European finance ministers made no
progress on releasing critical rescue funds to Greece. In between the markets
gained some momentum buoyed by expectations that the Federal Reserve may
announce fresh measures to stimulate the economy. However, this momentum was
short-lived following Federal Reserve’s assessment that the US economy faces
significant downside risks. Also, data showing further slowdown in China’s
manufacturing sector unnerved the global markets.
On
21 September 2011, the Fed announced a program known as Operation Twist, to
twist the yield curve by swapping US$ 400 billion of short-term debt for
longer-term maturities. Following the announcement of the program, negative
sentiments prevailed on fears regarding the effect of the Twist. Moreover, the
assurance from the G20 finance ministers and central bankers that they would
take steps to stabilize the global financial system failed to boost the market
sentiments.
Week Ahead
We
expect the markets to continue slipping downwards until positive developments
in global economy outlook uplift the market sentiments. During the week, international
policymakers are supposed to meet to review the measures taken by the Greece
government in Athens. This development would be closely watched.
Also, fears of weak Q2 September 2011 results
will weigh on the market outlook as the advance tax payment by Top 100
companies rose a modest 9.9% in Q2 September 2011 against the 19% growth in Q1
June 2011.
Moreover, the weakening of rupee against the US dollar would boost concerns of high inflation making import of goods especially crude oil expensive which will worsen the current account deficit. This will further dampen the market sentiment. Buying by institutional investors will be crucial to buoy short spells of rally.
We suggest your investors not to panic following the current market uncertainty and continue investing in good quality equity funds to grab the opportunity available at attractive levels (Read 5 Large-cap Funds worth Investing). Also, consider investing in short-term debt funds to benefit from the RBI rate hikes.
