WEEKLY CALLS

DUBAI CRISIS ROCKS GLOBAL MARKETS -

The Dubai Financial crisis hit the global markets by Thursday and as a result the global markets underwent a major dip. The Dubai debt crisis has its roots in the global financial meltdown which started from Jan 2008, but the tremors of that crisis were only felt now. In a knee jerk reaction, not only the global markets went down by 4-5%, but the U.S. dollar started rallying and as a result the impact was seen on the prices of crude, gold and other commodities.

REASON TO CORRECT.

In the early part of the week the Chinese banks gave a scare for a want of capital inducement and the weekend saw the Dubai banks being degraded because of the financial mess in Dubai. No doubt the exposure of various financial institutions and other companies having direct exposure to the Dubai market weakened the sentiments. But the Indian companies will be less affected as compared to their Global and Asian peers, which have more exposure to Dubai. Inspite of the fact that the Indian companies will be relatively less affected, it has given our market a reason to correct, which it was searching for.

TREND.

The Dubai financial crisis is just the reason the market was searching for to correct. The long term trend continues to be up and hence the correction should be used to enter long positions in good frontline stocks. The short to medium term trend has turned down as both the indices have managed to close below their 50dmas (Sensex – 16742 & Nifty – 4970). For short to medium term trend to reverse, it is imperative that the indices close above their respective 50dma as a first step and then crossover the immediate high of Sensex 17290 and Nifty 5138.