The markets ended the week 0.4% above from last week. Technically the market looks like it has built a base so that it can rally. The indicators are all bullish and that should augur well for the markets in the near term. There could be some initial period of consolidation as some indicators are in the over-bought region.
The Dow index rallied more than 100 points last evening on indications that the Federal Reserve could usher in another round of Quantitative Easing in the system to boost growth. If this happens then some of that money should come in to India and should be positive for the markets. The key variables to watch will be Gold rates and the Dollar rates.
The dollar closed the week at 55.50 to the Rupee. It can be expected to weaken a bit in the days ahead but it should still be within the range of 54.8-56.2 in the near term.
Gold has risen to record highs on speculation that there will be high demand domestically for the metal with the upcoming wedding season and festival season. Gold closed the week at Rs 30,810 for 10 gms. We could see the price rise as investors globally will flock to the metal if any easing is announced.
The RBI is not likely to cut rates at its policy meeting on September 17th. Yields on debt instruments are expected to hold steady for the same reason.