Weekly Report -May 14 2012

A combination of domestic and overseas headwinds continues to play havoc with the markets’ sentiment. The postponement of GAAR implementation by a year did manage to perk up the mood on Monday. But, that was perhaps too little, too late. The RBI’s latest attempt to put a floor under the sliding rupee also failed to work its magic. To add to the misery, the IIP data for March turned out to be another shocker and the eurozone plunged into political turmoil. The key indices continue to be under pressure as buyers are reluctant to stick their neck out just yet. Investors will return only if the Government bites the bullet on reforms. The global backdrop too should improve simultaneously. However, given the experience of the past several months any material progress on either of the two looks difficult, at least immediately. The markets could remain weak for a while before we see any sign of turnaround. The environment remains risky, so avoid undue adventures. Wait and watch is the right strategy to tide over the current turbulence.