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Uncertainty Rules High

With just a week left for the introduction of rolling settlement, uncertainty is the name of the game.

With just a week left for the introduction of rolling settlement, uncertainty is the name of the game on the bourses with the Sensex closing the week a tad higher at 3381. The bellwether opened the week below 3300 on NASDAQ worries. However, coming under the spell of selective amnesia, the markets rebounded to breach the 3400 mark in the next two sessions. The much-needed respite came from Oracle, which managed to beat analyst's expectation and suggested that the worst may have been over.

However, sentiment was again dented during the week when SEBI released the list of stocks with availability of option trading. With such stringent norms like market capitalisation, free float and daily average volumes, only 31 scrips passed the litmus test in the first round. Further, this includes only three technology stocks - Infosys, Digital and Satyam. With many momentum stocks left behind along with market favourites like Wipro and HCL technologies, the sentiments stood dampened and eroded the intra week gain.

Even as financial markets continue to reel under the impact of corrective dosages, the real problem seems to be that of a trailing economy. The core sectors of the economy were deep in the red, reporting a negative growth of 0.5% in May against 8% growth last year. While all core sectors recorded lower growth numbers, the crucial segments of petroleum, cement and steel recorded a negative growth. Further, the commercial vehicles segment, a key barometer of the economic activity stayed in the red with month on month fall of 28% in sales.

Outlook
With the impending rolling settlement and the abolition of deferral products, the substantial outstanding positions could see the market on a the downhill in the coming week. Add to it, with the results season just round the corner, it could also play a crucial role in deciding the future course of the markets. The expected rate cut in the FOMC meet on June 27 is unlikely to translate into any substantial gains for the domestic markets.

While technology firms have been trying to broad base their client and product range, a substitute to the big ticket US economy is something that they will never find. And if the spate of profit warning from the West is anything to go by, the technology companies that have been spearheading the growth of the service sector may not offer enough steam. However, any welcome surprise could provide the much-needed trigger to the battered markets.

The reasonably good monsoon may well end up being the trump card in the medium run for India Inc. A good monsoon and better harvest would lend the much needed demand kicker to the economy and could see the fortunes of several agricultural-dependent sectors lighting up in the run up to the festive season.