Market Update 1/10/2012

The Nifty ended September with a gain of 6.90% over the month. The important psychological benchmark of 5700 has been breached and the main indices hit their 52 week highs (Nifty 52 Wk H- 5735, Sensex 52 Wk H- 18869) on Friday.

Technically the market continues to look bullish. Some consolidation is expected around these levels in the short term. 5830 is an important long term resistance.

Spain's budget had investors around the world worried with it's burgeoning fiscal deficit problems. However, the Government has gone in for some positive measures that have helped investor confidence worldwide. Campaigning in the US presidential elections go on and the incumbent Obama is expected to win another mandate. This could be seen as a positive for the markets as the Fed will be likely to carry on QE3 with a Democratic White House. A period of consolidation with a slight positive bias is expected in world markets until conformation of the results which can be expected in early November.

The recently launched 'reforms' by the Indian Govt have been welcomed by the domestic markets with both local and foreign investors looking to invest in equities. FII's have been pumping in money in to the markets and as a result the Rupee is appreciating. A stronger Rupee helps to control our current account deficit and is seen as positive for the economy.

The Rupee ended the week at 52.8 to the dollar. Some consolidation is expected at these levels before the Rupee further strengthens.

Most analysts expect a rate cut in the RBI review meet on Oct 30th. Announcements by the RBI top brass have indicated that the central bank is worried about growth and could act to stimulate the same. However, inflationary pressures continue to persist. The Govt has indicated that it will stick to it's borrowing program and not over-shoot. This is seen as giving room for the RBI to maneuver.  The appreciating Rupee also gives the RBI some room to act. The recent revision in diesel prices and the expected surge in global commodity prices due to the surge in global liquidity are expected to keep inflationary pressures high.

Gold continues to remain an attractive asset class and could well be poised for another take-off. Price of gold has fallen from it's most recent highs. But, the factors both domestically (on account of the festival season) and globally (liquidity) suggest that gold could go higher in the near to medium term.