Long- term investors can use correction

Spooked by PNB scam, higher trade deficit, sustained FII selling, and volatility in crude oil prices, markets ended marginally lower for the third consecutive week.

The Sensex and the Nifty closed almost unchanged at 34,011and 10,452 respectively. Market breadth remained weak amidst high volumes and lack of buying support reflects negative sentiment. Imports rising faster than exports and concern around the alleged fraud at PNB have overshadowed optimism that was driven by global cues. It is pertinent to observe that good pullback in global equity markets ( US markets had best weekly gains in five years) could not move domestic markets much higher indicating no major upside in the near- term.

Expect some policy reforms ahead of Parliament session, say sources close to the Central government. The main worries about the Budget are the numbers. Budgetary allocations do not match the ‘ grand’ announcements in healthcare and agriculture. However, fine print indicates financing would be off balance sheet and funds would be raised from the markets.

With RBI introducing a timeline for the country’s banks to recast bad loans and also scrapping previous methods, observers feel a shakeout in the PSU banking sector is imminent. Focusing on the LCGT is a narrow view of judging the present correction. Without trying to second guess the market’s movement, long- term investors can use the present correction for stock picking.

For the week ahead, chartists predict trading range of 33,500 and 34,500 and 10,300 and 10600 for the benchmark indices. Support for the indices evident at 33,750 and 33,500 and 10,375 and 10,300.