High volatility expected amidst geo political tension

Market Outlook for March, 2014

The month of February which begun on a negative note with short rollovers was a classic bear trap month when we saw buying in the cash and index futures by the FII’s in the 2nd half of Feb resulting in hectic short covering by bears towards close of expiry pushing up the index by 200 points over the settlement.

 

The month of March has begun on a volatile note with global markets spooked on the back of tension in Ukraine .While an early resolution to the tension could see positive sentiments returning to markets ,any prolonging of the same could prove to be a drag on equity markets. However, the strategy should be to buy quality stocks on any sharp declines if opportunity arises.

Macro picture
The major event of February was the worse than expected GDP growth of 4.7% for the quarter ending Dec 13 against the expected 4.9% .With the UPA Govt. in its last legs before the general elections expected to be held in April-May, now all hopes will spill over to the next Govt. which will be voted to power .The focus of the market will also shift to analyzing fortunes of the political parties and the direction of the market also largely hinges on the credibility of Govt. formed.

 

Global markets

 

The interesting development in Feb was the depreciation of the Yuan against the dollar from 6.06 to 6.14 in a short span of 3 weeks which has taken the market by surprise which has got used to a placid exchange rate of Yuan as compared to the volatility exhibited by currencies of other emerging markets. Possible reason could be to possibly boost exports particularly to the US which could provide some impetus to an otherwise sluggish Chinese economy. The further course of the currency will be interestingly watched in the coming months.

 

Conclusion

All in all the month of March could see high volatility with geo political tension coupled nearing of general elections at our end.

 

Happy investing!!!

Written By : Equity Research Desk

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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