Wednesday March 13, 09:00 AM
Temple politics tempers outlook... |
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By Equitymaster.com
Just when the bourses look like getting out of the tangle, one or the other issue crops up to dampen spirits. With escalating tensions over the controversial 'Ayodhya' issue, investors have chosen to adopt a wait and watch policy. Tempers are also running high on the Gaza strip, which may strengthen the oil prices further.
With the Wall Street taking a breather post the fabulous run up last week, domestic software companies too seem to be aping this trend. Moreover, political tensions at home have added to the concerns. Since fiscal deficit is at 5.7% of GDP, the rise in crude prices does not augur well for the country. This could result in higher inflation. With APM being dismantled, petroleum subsidies would be directly reflected in the government's balance sheet, which was not the case before. So rising crude prices are a concern.
In the midst of these bits of bad news there is a small ray of hope with Dr. Reddy (REDY.BO, news) 's acquiring a UK based generics company called BMS Laboratories and its wholly owned subsidiary Meridian Healthcare (UK) Limited, one may look forward to more such aggressive moves both in the pharma sector, as well as in other sectors such as software. These sort of acquisitions may change the valuations for the respective sectors and eventually aid the recovery of sentiment.
However, in the short-term, the movement of the domestic bourses will be guided by the aforesaid events. If everything is resolved peacefully then we might see some strength in sentiment. However, if the tension escalates then investors are likely to be concerned and thus we may see a sideways or even a downtrend as the next support level for the Sensex is at 3,300 levels.
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