Market upmove has continued for last 2 weeks. FIIs have bought nearly $4bn worth of equities and $3.5bn worth of debt. EPFR data suggests that the funding stems from reallocation of portfolio assets towards EM markets. The liquidity is essentially fueled by cheaper loans given by ECB to EU banks.
The Greece crisis is averted until April when Greece faces the election. The other key dates to watch for is 6th march (UP election result), 15th march (RBI policy review), 16th March (Annual Budget)
The indications are that there might be CRR cuts which will ease liquidity. Budget is expected to pack in some hard measures on taxation in order to contain the ballooning fiscal deficit. If Congress wins more than 22 seats out of 403 seats in UP, it will be good for market. A credible fiscal consolidation roadmap in the budget will be good for market.
Companies are expected to report lower margins in FY12 figures in march YoY. Macro factors remain uncomfortable. Comfort from the Base effect of Inflation will run out in Mar. Domestic funds have been mostly selling since the start of 2012. So the market will remain tuned to the Global trends in short term.
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