Battered Street seeks Infy guidance

MARKET WATCH

After weathering the fallout of the cash reserve ratio and repo rate hike, the market will seek fresh impetus in Infosys Technologies' guidance and global cues in the coming weeks.

The CRR hike dampened market sentiment to such an extent that the Sensex recorded its second-biggest fall in absolute terms on Monday, tumbling 617 points. However, a recovery in bank, metal and technology shares saw the index end the week at 12,856 - down 216 points. The Nifty, which had plunged to a low of 3,617, closed the week at 3,752, a loss of 70 points against its 188-point fall on Monday.

On Friday, there was some good news from the US: jobless rate had fallen to a five-year low, giving the economy a much-needed prop as it struggles to overcome a slowdown in housing and manufacturing. Official figures showed that employers added 180,000 staff to their payrolls in March and 32,000 more jobs were created than initially estimated in the previous two months.

What may further soothe market sentiment is the playing down of the US slowdown by the International Monetary Fund. The Fund on Thursday said the US slowdown should not drag down economies of the rest of the world as long as the US does not succumb to a full-blown recession.

In its latest World Economic Outlook, the IMF said the factors currently slowing the US economy - "primarily housing and manufacturing" - are so specific to the US that they have had a "limited global impact". Analysts now believe that the Fed may not go in for a rate cut in the near future.

Back home, the situation is different. The market is now weighing the impact of rising interest rates across sectors, especially banking, technology and cement.

A fund manager with a US-based fund said, "Inflation and current market valuations will give an indication of how the market will pan out."

If we look at foreign institutional investors' reports, most are bearish on India. They were net sellers in all the four trading days of the last week, taking their net sales to $150 million.

An appreciating rupee too is affecting fresh inflows as bringing money at higher rates will mean lesser returns when the rupee depreciates in the near-term. Marketmen don't expect the currency to stay strong for long given that the country's current account deficit is widening.

In fact, investors, who had started looking at debt schemes of mutual funds with a long-term perspective, are now looking at six-to-12 month horizon as they don't expect equities to stay subdued for long.