Equity Market Update
 
A truncated trading week started with Indian markets reacting to the defeat of the bailout package i.e TARP, (Troubled Asset Relief Package) in US congress. It had a simmer of hope midweek & ended in despair on the last trading day, with a weekly fall of more than 4% in key indices. Metals, Oil & Gas, and real estate stock lead the fall in Indian markets. The CNX Mid cap index fell more than 4%.
 
Outlook for the week

The financial crisis in US which began more than a year ago has entered a new far more serious phase.  Further Central Banks globally had to put in coordinated efforts to pump in adequate liquidity in an effort to break the freeze in global credit markets. The SEC (Securities and Exchange Commission) has further extended the ban on the short selling of financial stocks in US. While such steps do provide temporary relief to the stock markets, outlook for US economy continues to remain uncertain and weak.

Domestic consumption and commodity price correction continue to support India’s growth and may be beneficial for Indian markets. As the market remains volatile, stock selection is even more critical as we expect greater divergence in the performances between different sectors and stocks.
 
Debt Market Update

Outlook for the week

10 year gilt yield declined on falling oil prices and general consensus in the market on status quo on rates from RBI. Liquidity is extremely tight on Foreign Exchange intervention from RBI, increase in the government balances and higher CRR requirements. Holidays in the first week of the reporting fortnight also complicated the situation. Money market rates have increased substantially in line with the tight liquidity situations. Secondary market trades have slowed to a trickle with participants not willing to commit funds in view of uncertainty on the liquidity situation.

We expect tight liquidity situation to continue for the coming week as well.

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