India Infoline Weekly Newsletter - March 12, 2010

The key stock indices appear to be in a limbo after some sparks of gains which coincided with the budget. The struggle could well spill over to next week unless the Q4 advance tax numbers turn out to be spectacular. A global market rally will of course be a boost; if it happens.

Having said that, we have seen in recent days that emerging markets like that of India and China have under-performed vis-a-vis the advanced markets. While the Sensex and Nifty continue to be sluggish, stuck in a tight rangebound trade, the Nasdaq and S&P 500 have touched 18-month highs. Global stocks have been pushing higher since early February, helped by improving sentiment around Greece's debt woes and hopes for a gradual economic recovery.

Sentiment could take a hit temporarily if the Chinese authorities take further action following a spate of bullish economic reports. The Bank of Japan could ease monetary policy next week to preempt the yen’s appreciation. Back home, some concerns have been building up on stubbornly high inflation and its adverse impact on interest rates though no major move is expected from the RBI till the annual policy meeting next month. Before that, quarterly earnings will have some say in determining market's near-term direction. Till then, the market may remain subdued and choppy. The Nifty is unlikely to break out of the current range of 5100-5150. Any upside will meet resistance at 5180-5200. On the way down, support is seen at 5100 initially.