Weekly Outlook for Indian Stock markets - 22th October to 26th October 2007

One of the most fascinating aspect of the stock markets, albeit most dangerous as well, is the uncertainty that it carries. Especially, if we look at the way markets have fared in the last two weeks.

Two weeks back, markets were looking apprehensive on the anticipation of mid-term elections and despite these concerns, markets closed the week with approximately 4% gains. The last week performance was again no less than a surprise. The markets expected to remain range-bound on the anticipation of half-yearly results, but suddenly out of nowhere, news on P-notes emerged and took markets down very badly.

Well, let’s do introspection on P-notes and its possible implications. First of all, there are strong signals that current draft on P-notes will be amended to an extent that it regains the confidence among Foreign Institutional Investors (FII). There are chances that government may increase the 40% cap to 60% on Thursday when SEBI meeting is scheduled. Also, there are reports of increasing the sun-set period to 24 months. Hence, long term investors can breathe easy. Markets will not going to crash, albeit can go down in a short term.

Though, this week could be a tricky one and there are ominous chances that volatility in the market may increase around 25th October when SEBI sits on P-Notes draft. Thus, the advice for this week is to be a stock specific and that too for a longer duration of time. Nobody knows which way market will be headed in the going in a month’s time or so.

Wish you a very happy investing!