Market looks oversold, rebound rally likely, says CLSA

Laurence Balanco of CLSA says the Philippine Stock Exchange, Hang Seng & Nifty have been the weakest markets having broken below their respective August/September lows, but are now 'oversold' & due a rebound rally.

According to him, the Nifty is likely to spend a period of time consolidating between 8,076 - 8,143 support & 8,507 - 8,562 resistance.

Clearly a break below 8,076 - 8,143 would be a concern opening the door for further weakness towards next chart support at the 7,700 - 7,722, Balanco says.

Meanwhile, Neelkanth Mishra of Credit Suisse says while the RBI can bring down the cost of funds, and also increase money supply through open market operations, the demand shortfall in the economy may need a government stimulus.

Even if so, he believes the impact would come through with a lag. He feels the government's role in the economy has shrunk meaningfully, particularly when it comes to capex & most of the central government expenditure currently is non-discretionary.

"Building up a capacity to spend is, therefore, a challenge, as we are discovering in the slowing growth in roads ordering, as well as in construction. So a slowdown first, and then the fiscal stimulus would start to show up in growth numbers," Mishra says.