Market correction

After a fall in Nifty to the tune of 3.8 percent last week market saw a recovery in the start of the week with banks leading the gains. Improved domestic trade data together with ease in inflation for the month of October supported the markets. Further overseas markets too lent the support to the domestic markets. Last week ending 12 nov,weak IIP data for the month of September showed moderation in Industrial activity that gave some nervousness in the market. Though it is difficult to say anything on Industrial activity growth moderation but one factor that may have resulted in the same could be longer monsoon this time around. Another factor to be looked upon is cement,car sales,etc continued to show robust demand in the economy. So there could be disconnect in the number as the number for August was also revised upwardly. The talk of capital control in the emerging economies especially in the context of India as a result of quantitative easing in the advanced economies were also ruled out as in India we would have close to 3 percent trade deficit with respect to GDP. On Tuesday markets saw another round of selling on likelihood of further monetary tightening in China and Ireland debt concerns. Both Indian Indices i.e. Sensex and Nifty closed below the psychological mark of 20,000 and 6,000 respectively. Another round of tightening in China in order to curtail rising inflationary pressures in the economy may affect the commodities demand and will further hurt the global growth were some of the concerns that ruled in investors mind on the street. Irregularities in allocation of 2G spectrum affected the market sentiments and telecom stocks. European stocks saw buying on expectation that Ireland would accept rescue package for ailing banks in the country. Lot of concerns primarily coming from abroad settled markets down during the week with Nifty and Sensex losing closer to 3 percentage points and settling at two month closing lows.. Going ahead next week volatility could remain high due to expiry. Any set of bad news from overseas markets could spoil the market mood further. Flow from overseas investors that were in deficit in the week and political developments on the2G spectrum allocation should be closely monitored.

The writer is CMD,SMC Wealth