>Karvy Bazaar Baatein

06 April 2009 to 12 April 2009

The optimism continues…

Last week, global markets continued to be infl uenced for all the right reasons by news and data flow emanating from the US. In fact, markets across the globe had cheered in the penultimate week over President Obama’s detailed bank rescue plan to buy US$1 trillion worth of toxic assets from the country’s ailing fi nancial institutions.

So has anything changed in a fortnight? Well, the answer is MAYBE. What we are witnessing today is a marked recovery in market sentiment, based on the belief that we could see an early recovery. Moreover, the continuous fl ow of positive economic data has strengthened investors’ belief that global markets may have bottomed out. First, US manufacturers’ new factory orders rose 1.8% M/M against a prior decline of 1.9%. Secondly, there was a marked improvement in both US domestic vehicle sales and construction spending. More recently, Obama’s US$3.5-trillion budget for fi scal 2010, which was aimed at overhauling the country’s education and healthcare system, was approved by the US House and Senate.

Last week, all eyeballs were focused on London, where the G-20 Summit is underway and efforts are on to put a consensus mechanism in place to tackle the current financial scenario. In many ways, the Summit has proved to be historic so far, as leaders backed the French and German demand for greater regulation of the financial sector, including hedge funds, which will prove to be a major setback for the free-market proponents. Clearly, this Summit has ushered in a New Era that will be less US-centric even as the role of emerging markets, such as India, China and Brazil, get increasingly underlined.

Back home, markets surged even as analysts debated on the fi ne point of whether there is a distinct shift in fundamentals or whether we are merely witnessing a bear market rally. However, we are still a long way as the world’s largest democracy braces itself for the general elections and market experts pray for a stable government that could take economic reforms a step further. Meanwhile, even as we are writing this, the US unemployment data has recorded a 25-year high of 8.5%.

To see full report: BAZAAR BAATEIN