>Karvy Bazaar Baatein

20 April 2009 to 26 April 2009

Sentiment resurrected…
Both the BSE Sensex and the Nifty completed a sixth consecutive week of gains, as investor sentimentcontinued to resurrect from the depths of despair. Although the Nifty crossed its 200-day movingaverage of 3400 levels during the week, it fi nally closed at 3385 levels, a gain of 1.28% W/W. Meanwhile,investors cheered as the Sensex closed above 11000 levels, a rise of 2.03% W/W. Since this rally beganfrom the March 9 lows, the Sensex has jumped nearly 36% while the Nifty has risen by more than 32%during the same period. Sentiment is a state of mind, and a rally as spectacular as this one has clearly got retail investors talking once again about the stock markets.

So is this rally sustainable? Well, to begin with, we continue to reiterate that the news fl ow from the USis key to global recovery. While a few economic data points came in lower than expectations, some keycorporate earnings exceeded market estimates—Wells Fargo, JPMorganChase, Citicorp, and Hewlett-Packard announced better-than-expected earnings, providing a fi llip to the global markets. Moreover,reassuring noises from policymakers provided the necessary support for the markets—while the FedChairman Ben Bernanke felt the “sharp decline” in the economy was easing, President Barack Obamaexpressed confi dence on the stimulus plan leading the way to “economic progress”.

However, one should not forget that there is a key local issue that is being intensely played out today—theGreat Indian General Elections. With the world’s largest democracy going to the polls, we have seentremendous volatility in the stock markets. With no clear winner in sight, there is a pall of uncertaintyhanging over the potential policies of the new government. What’s more, this time around, there is afeeling that the fi nal verdict may be more fractured than ever, and this, in turn, would limit the powersof the coalition government to introduce reforms and make timely decisions. In such a backdrop ofuncertainty, volatility in the stock markets could rise to unprecedented levels. Therefore, a cautiousinvestment approach is recommended until the poll results are out.

To see full report: KARVY BAZAAR BAATEIN