Today, we expect a flat to cautious opening as global cues are indecisive. There could be a slight rebound after the recent reversals. We remain cautiously optimistic and see a choppy yet range-bound market.
The hurt bulls understand that recovery comes in different shapes and sizes. Some expect it to be ‘V’ shaped; others reckon it will be ‘U’ shaped; there are a few who believe it will be a ‘W’ shaped turnaround. In summary, we are on track for a slow and steady recovery rather than a swift one. Locally, a below par monsoon will negate the positive effect of the stimulus measures. The panic over the outbreak of swine flu is avoidable though.
Globally, the Fed is likely to maintain its accommodative stance given the fragility of the US economy. It is expected to repeat the phrase that ‘recession is moderating’. Inflation comes secondary for most central banks, though it will start to spike from later this year.
For those who follow the Dow Theory, technical charts are throwing up bullish signals. Both the Dow and the Dow transportation index have topped their January highs. Still, many strategists are skeptical about any potential advance from this point.
As far as local stock indices are concerned, the Nifty levels to watch out for are 4400 on the downside and 4520 in the immediate future. It is reasonable for the market to take a breather after a sharp and strong advance like the one we have had since early March. One cannot expect a linear, one-way movement in key indices to last long. A little pause is normal and perhaps healthy.
