“Stock markets are oversold but there is no buy signal at the moment. Trading would be highly volatile and for the next 3-4 days the trend would remain the same,” Geojit BNP Paribas Financial Services Research Head Alex Mathews said.
They said that markets are in a bearish phase right now and investors are fearing losses as the government is planning stimulus withdrawal. “Market would continue in downward trajectory following which some recovery might set in. There might be a pre-budget rally after two weeks and investors should plan their exit around that time,” SMC Global Vice-President Rajesh Jain said.
Focus on budget
Some traders are of the view that with no major events lined up, focus is now on the government budget and traders would be picking their choice ahead of that.
At its third quarter monetary policy review on Friday, the RBI raised the cash reserve ratio (CRR) — the amount of funds banks must park with the central bank — by 75 basis points at 5.75 per cent and held key interest rates steady.
India’s benchmark stock index recouped all losses to end 0.31 per cent higher at 16,358 points, with bank shares outperforming as interest rates were held steady. The week saw money moving to the US dollar which helped in further strengthening it. Traders feel this week the market would trade in a range as domestic investors would continue to buy.
Last week, FIIs pulled out Rs 6,150 crore from the Indian equities. With this the FIIs turned net sellers in 2010 with outflow amounting to Rs 500 crore so far this year.
The RBI also raised its growth and inflation forecasts while calling on the government to roll back its borrowing, and highlighted that its main policy instruments are at levels more consistent with a crisis situation than with a fast- recovering economy.
Some analysts are hopeful that with the US economic data showing the country growing at an annual rate of 5.7 per cent in the the fourth quarter of 2009, more money might flow out from the market. “With the US economy recovering there is a slight caution that there might be a reverse flight of foreign funds from the emerging economies to the US markets,” Taurus Mutual Fund Managing Director R K Gupta said. On Friday the Wall Street closed in the red with Dow Jones Industrial Average ending 0.52 per cent down at 10,067 and tech heavy Nasdaq closing lower by 1.45 per cent at 2,147.35 points.