Liquidity Induced Rallies

Central Banks, the world over, are on a monetary easing mode to spur growth for
their respective economies.    Barring the eurozone, these measures seem to be
yielding results in varying proportions.    US is showing signs of recovery.    In Japan,
Abenomics seems to be working for its economy.    At least, the latest Q1 GDP
number seems to suggest so.

While these monetary easing measures may have spurred growth, the other aspect
of these measures is the conspicuous stock market rallies world over.    US stock markets,
the Nikkei, DAX, Nifty, etc., are trading at their record highs.    In the context of Nifty,
market is rallying on the back of strong FII inflows defying macro economic fundamentals.

The IMF in its latest report on emerging economies cautioned that "financial imbalances
and rising asset prices, fuelled by strong credit growth and easy financing conditions
are building in several Asian economies".    In the event of severe global slowdown,
capital flow reversals and falling external demand would exert a powerful drag on Asia's
most open economies.

Weekly Outlook

Nifty is inching upwards on low volumes.    It seems there is no conviction
in the ongoing uptrend.    On the technical chart,  market is trading in an
overbought zone.

I will not be surprised if market takes a breather.    If the upcoming quarterly
numbers do not meet street's expectations or the inflation numbers disappoint
then, a correction cannot be ruled out.

Global Economic Parameters

Read some useful comparatives.

Country                            Investments                Gross National Savings
                                        (% of GDP)                       (% of GDP)

China                                    46.875                              49.473
India                                     34.915                              29.802
Japan                                    20.581                              21.57
France                                  19.901                              17.569
Euro Area                             18.285                              20.20
USA                                     16.16                               13.131
  

Weekly Outlook

With Reserve Bank of India meet on May 3rd turning out to be a non-event,
market for the coming week is likely to remain sideways.

Upcoming quarterly results, factory output data and global cues will determine
the trend of the Nifty in the coming sessions.

Market Synopsis

Yesterday, India slashed the rate of tax levied on the interest that foreign investors earn
on their investments in local bonds to 5% from 20%.    The new rate will be effective
from June 1, 2013 to May 31, 2015 to FIIs and individual investors in govt. securites
and rupee-denominated government and corporate bonds.    Earlier, the 5% tax rate on
foreign investments was applicable to long term infrastructure bonds.    But, with the
latest decision by the govt., the lower rate will be extended to all categories of govt. and
corporate bonds.    Market is seeing this measure as another step taken by the govt. at
addressing the Current Account Deficit.
 
INR closed at 53.80 versus the USD on Tuesday after appreciating 43 paise over Monday's close.   
Market has responded positively to the govt.'s measure.

Yesterday, Unilever announced its decision to go for a strategic stake in Hindustan
Unilever Limited from 52.5% to 75%.    The market received the news cheerfully.
The stock price shot up by 17% yesterday.

All these are adding up to the already prevailing positive sentiment in the market.