Reference Auto

There was adequate reason for the Sensex to shed 571 point last week and close at 19,585 points and the Nifty to tank by over 3 per cent to 5,890.

Interest rate hike in China, the Ireland financial crisis as well as the uncertainty in the wake of the 2G spectrum controversy could come as a blow to the Sensex, at least in the near term. Unless there are positive triggers for the markets, this sinking feeling is likely to grip the bourses for quite some time (may be up to a month).

During the week, the BSE Mid-cap and Small-cap indices were hammered to even lower levels than the Sensex and lost over 4 per cent and 6 per cent respectively.

All BSE sectoral indices closed lower during the week. BSE Realty and Consumer Durables indices lost 9.3 per cent and 7.4 per cent respectively.

Investors are wary that FIIs could continue to pull out or may postpone their buying till stock prices correct (read fall).

With China raising its bank reserves (funds parked with its central bank) by 0.50 per cent, it is expected to suck out a substantial amount of money from the system and put a strain on lending in the country, thereby raising interest rates.

China is the largest importer of metals and commodities and this move by the county’s apex bank may take a toll on prices globally.

Moreover, Ireland is unlikely to come out of the crisis any time soon and there are fears that the Euro zone slump may spread to other countries as well.

The only hope now is that the US festival season is just a month away and buying, especially in the retail segment, may pick up. This could spur the stock markets.

But experts argue that the Euro crisis and the China bank’s move could only hit the bourses in the near-term. India Inc is scheduled to see robust performance this year, and this, along with a healthy growth rate projection, are the biggest triggers for the stock markets to perform well.

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