Starting from 16.05.2008, both the indices have posted weekly losses for continuous 6 weeks in a row, and have made new lows during June 2008, breaching previous lows of deep cuts in January'2008 & April'2008. All the Nifty heavy weights are in down trend, excepting few stocks like Ranbaxy, and the news flow from abroad and domestically day in and day out is completely negative. While year 2007 seen one of the largest FII flows to emergeing markets including India, this year has seen reverse of flows. The huge support from insurance companies and domestic mutual funds which have invested already 10$ billion dollars, are saving the markets at current levels. Crude crossing US$142 domestic inflation touching 13 year high at 11.42% on 27.06.2008, added to the political instability being felt due to the stand off between UPA and Left parties adding to complete apthy to equities by investors.
Technical analysts world over, are predicting deeper cuts in global markets for another year atleast, as crude is suspected to be touching 170$ due to dollar weakness, which is importing infation in all economies including US. US also will have presidential polls this year, where both the ruling party and opposition are trying to comfort investors and public with sops rather than taking tough measures to tackle the inflation. Nifty and Sensex have closed just above 35% correction level from their all time tops made in January 2008, and any further weakness from these levels push indices into prolonged bear market, where preserving cash levels will be the key to sucess. If one wants to invest in stocks, have to look beyond 2 years from now minimum, for good returns. The strategy should be to pick up good dividend yielding stocks gradually, with strong fundamentals, which give some returns, inspite of the stock price movement anytime. VIX has closed at 32.20 suggest continued hightened volatility. Nifty July futures have closed at 58 points discount, indicates huge short positions built up.
Monday being the last day of the month and quarter, some fund buying for propping up NAV might be there, which helps indices to post gains. However, closing above May closing (4870.10) or March closing(4734.50) cannot happen in the present circumstances, thus it will be negative closing for the month as well for second quarter. The sentiment in the markets can improve considerably only on cooling of crude sharply below US$120 levels, which is a remote possibility in near future. However, stock specific news flow might invite investor interest, as we enter into Q-1 results as they would be revealed in July, starting with tech sector major "Infosys technologies".
Out look for July will be analysed after the close of markets on monday, being the last day of the month and quarter.
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