Markets witness mix trade: Is this the testing point?

The markets took a breather after two days of back-to-back rallies. The indices consolidated in a narrow band and finally closed with handy gains. The NSE Nifty ended higher for the third consecutive session with 25 points gain at 5,481, while the BSE Sensex ended at 18,273.80, up 70 points.

In the opinion of Amit Dalal Executive Director of Tata Investment Corporation, markets enjoyed consecutive rally on supporting fundamentals, low inflation rates and positive global cues. Once the excitement is over, one of the biggest barriers for the markets to go up further from this level will be declining confidence. "If you see the Nifty premiums which were much higher in the month of January, it will take a lot more in terms of market participation for those premiums to come back," mentioned Dalal. Is this a decisive trend? Rahul Mohindar of viratechindia.com feels that the volume was very good. "I would really like to watch if we can stay above the 5,650 mark and I think that's what would really give us the decisive new trend," said Mohindar. He also believes that the upward trend would extend to about 5,620-5,650 on the Nifty. According to Ajay Parmar Head-Institutional research at Emkay Global Financial Services, markets react significantly to scams but not for a longer period of time. As far as ongoing reports on scams are concerned, markets have picked up once some improvement is seen in the legal framework related to scams. Agreeing with Parmar, Dalal said that the market is trending to become investment worthy despite the news on scams. Reacting on the inflation issue, Parmar says that it will fall over time. "We believe inflation could be around 6.5% next year. If you look at the interest rate, it is because of liquidity and we have seen the deposit rate going up in the last few months. So, that will be adequate to manage the credit growth of almost 20%." It seems that this could be the pre-budget rally as the Nifty swiftly moves from 5200 level to 5500-mark with the feeling that negative headwinds are over for the time being. However, once the budget is out, markets will show whether the trend is decisive towards positive or negative. Also watch the accompanying videos.