The bears seem to be at an advantage with the European debt crisis continuing to cast a shadow over global economic recovery. News of the Bank of Spain bailing out savings bank CajaSur is a stark reminder that not all is well with European banks.
The euro erased some of last week’s gains to slip over 1.5% against the dollar. US stocks too closed in the red after a choppy session. Asian markets are down sharply, led by the Nikkei in Japan. Stocks in China have turned lower after Monday’s big rally.
We expect our market to start lower amid weak global cues. Lesser the risk, lesser the loss seems to be the mantra for now as major world markets are trading below key technical support levels.
The whole of Europe is on an austerity overdrive. The UK too has unveiled spending cuts to rein in budget deficit. This will further delay a return to pre-Lehman era. Overall trend remains down but some pull-back is bound to come at lower levels. On Monday, the market opened higher but closed nearly flat.
Today being a Tuesday, a turnaround at the end of the day is not ruled out completely. The key is not to get carried away by any short-covering led bounce as the equity markets remain hostage to headline risk. Volatility will spurt this week owing to Thursday's F&O expiry.
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