Mkts end in green; experts divided on road ahead

It looked like the markets would reel under the repo rate shock, but a smart recovery by rate sensitives helped indices close with modest gains. The Nifty closed at 4,539 up 16 points, while  sensex shut shop at 15,250 up 65 points.

R Venkat Subramanian of Kotak Securities said today's market action is somewhat encouraging. "From a macro point of view, I don't think we are yet ready to call a bottom for the market. The circumstances under which we have reached here are quite challenging. For the first time in three years, corporates are now not operating in a benign macro environment. Now, they are going to be put to test with raw material price increases, interest costs and rising salaries, and a difficult global environment. With all this, will they be able to maintain their growth or will there be a serious cut in earnings. We will have to wait to see that. Already analysts have started cutting their estimates. To that extent, there is certain amount of disappointment getting priced in, but what we need to wait to see is whether its going to be worse or on the contrary are companies going to manage the environment well enough that the situation may not get any worse from here, in which case this may prove to be a bottom."

According to Subramanian, based on current news flows, investors may not want to go and sell this market at this stage. "Traders may want to risk some capital at this stage, but as a trader, one is not interested in the ultimate destination. One is more interested in the path. In that path, this maybe a point where one would want to buy. But from a long-term investment point of view, it is definitely more challenging. One will perhaps have to wait to see the Q1 results, and how the current difficulties are taken by the corporate sector. At this stage, I would buy from a trading point of view. But from a long-term investment point of view, it's still not time to make any big commitment to this market."

Rajiv Anand of IDFC Mutual Fund said there has been a fairly vicious bout of profit taking, but the fundamentals really have not changed. He feels oil prices will the set the tone of markets going forward. "The Reserve Bank of India has played its card. The concern about inflation has been put out this morning. We had been wondering whether they will raise rates, given the fact that growth is not as robust as one would like it to be. But given the fact that we will probably hit double-digit numbers sometime in the next couple of months, inflation is clearly a concern. Any market fixed income or equity is in a sense a play on oil. If oil comes down then the credit growth, inflationary concerns, pressure on the rupee, and subsidies will come off.  The whole macro-environment will probably look better. So, everything in a sense has now become a function of what happens to oil."

Rajat Bose of rajatkbose.com believes this momentum might continue. "For the last three days, the market went down and then recovered pretty sharply towards the end, despite the fact that international cues and developments actually made the markets open lower. But after three days in succession, the markets recovered strongly, I believe a pullback rally is here and is on. The first pullback rally target would be 4,560. Once that level is crossed, the crucial test for the Nifty will happen between 4,680 and 4,710. When we see the Nifty going above 4,710 and sustaining, only then will this be more than a pullback rally."

Ashu Madan of Religare Securities is negative on the market. "I will not be advocating a long-term buy. At this time, investors should look for trading opportunity. Even if we initiate long positions at times, with this kind of gap down openings at these levels, it is only meant for the short-term."