Note: During last week of Jan'10 we have seen Nifty falling from 5200+ levels to 4700 and during the first week of Feb'10 we also saw the bounce back (you call it relief rally or pre-budget small rally) where Nifty bounce back to 4920-30 levels. Since the upside move was with low volume hence not sustainable, that is what we have seen during last few days Nifty calling back to 4850 levels.....What next? - We are expecting this correction to continue and possibly looking for Nifty levels of 4700 & below, all that possible by this month end itself or max by early next month.
Stock markets around the world are down about 10 percent since their January highs. Complacency, which was so high only weeks ago, has quickly vanished. Worries, if not outright angst, have returned. There are many worries around the globe, few are listed below....
Worry #1: Europe — Sovereign Debt Crisis
In Europe market participants are worrying about sovereign debt levels. Greece is poised for a funding crisis if left alone — as is Ireland, Portugal, Spain, and Italy.
Worry #2: China — Too Much Growth
In China, the world’s third-largest economy, an overheating economy is the main source of the current worries. And it’s igniting inflation and asset bubble fears.
In an attempt to slow things down, last Thursday the Chinese central bank tightened its reserve requirements for lenders. However, some experts feel that the government’s efforts might not accomplish much …
According to Bloomberg three firms have not revised their growth outlook for China since the change in the reserve-ratio announcement: Goldman Sachs still predicts 11.4 percent, Bank of America-Merrill Lynch 10.1 percent, and Capital Economics 10 percent. All represent sharp increases from 2009 when the Chinese economy expanded 8.7 percent.
Worry #3: The U.S. — Too Little Growth
In the U.S., pundits are worried about high unemployment, which the White House says is expected to average 10 percent through 2010. Concerns about a slow and bumpy recovery, or even a double-dip recession, are adding to a relatively dire picture.
Last year’s fourth-quarter GDP growth of 5.7 percent is treated as ancient history. And President Obama’s enthusiastically-greeted presidency is showing severe erosion.
Stock market corrections from three regions of the world explained by vastly differing reasons. Debt worries, too much growth and too little growth. Whatever story fits best to falling stocks seems to be offered by the media. But to me the current situation is typical for a correction in an ongoing, medium-term up trend. We could easily see another week or two of shaky stock market behavior. And I expect that this correction will run its course relatively soon. Thereafter, January’s highs will quickly be in jeopardy.
-JK, Lead Associate, SLT
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