VR Logo

Volatility Abounds

Though the market ended the week on a good note, it was a rough ride. Global factors and economic forecasts played an important role

At the start of the week, it was grim forecasts that hit the market.

Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said that the global economy may suffer another slump due to higher oil prices and widening budget deficits. "I see the worry of a double whammy from energy costs and fiscal burdens, increasing the risk of a setback in the economic recovery," Roubini told a conference in Paris. Oil may rise to $100 a barrel, he said.

A World Bank report stated that it expected the global economy to shrink 2.9% this year versus its earlier prediction of 1.7%. However, there was good news for India. The World Bank lifted its GDP growth estimates for India for 2009 and 2010. But then, we live in a correlated world and have to put up with the vagaries of the global marketplace.

So it was not surprising that the Sensex closed lower on Monday (14,326) and flat on Tuesday (14,324).

Markets ended with modest gains on Wednesday, with the Sensex closing at 14,422. After a sluggish start and a range bound first half, key indices perked up in the second half as the bulls stepped on the gas. Power, Capital Goods, Pharma and the Realty stocks stock led from the front. However banking stocks were under pressure. The Mid-Cap and the Small-Cap indices outperformed the benchmark indices.

The market ended on a dismal note on Thursday (Sensex: 14,345). After a promising start, bulls were unable to hold on to their gains as markets turned volatile on account of the F&O expiry. Traders and investors preferred to book profit towards the end of the day. Barring the Realty and the Banking indices all the other BSE sectoral indices were in the red. Selling was witnessed in the Auto, Oil & Gas, PSU and Consumer Durables index.

The week ended on a great note (Sensex: 14,764). The June series may have ended with a whimper but the July series has started with a bang, mainly on account of strong global markets. Wall Street led a global rebound after data showed that the U.S. economy shrank less than expected in the first quarter. It was aided by strong profits at a handful of U.S companies. But the news around the world is not good. Crude oil is above $70. Toyota's new boss warns of two more tough years. Core consumer prices in Japan chalk up another drop, fueling further fears of deflation. South Korea’s surplus declines in May.

While global news will continue to impact us, in the immediate future it will be the Budget and quarterly results that will determine the direction of the market.