Market Outlook

Last week,  the US Federal Reserve stayed on its course on lowering its assets
purchase program,  dropping it by USD 10 billion to bring it down to USD 55 
billion a month.    It also released interest rate forecasts that predicted rates would
go up by 1% by end 2015 and 2.25% by end 2016.    Janet Yellen stated that rates
would start rising six months after the asset purchase program got over and that 
should be over by end 2014.    Markets quickly discounted the development.
Dollar Index rose,  gold prices fell and yields in the US rose.
Another development has been the stand off between Russia and the West over
Crimea.    Market analysts believe that any escalation of the crises will hurt 
emerging markets.

Regardless of all these headwinds,  Nifty is inching upwards on course to achieving
historic peaks by the time the elections got over.

Market Outlook

Last week saw metal stocks getting hammered on account of growth concerns in
China.    IT and pharma sector underperformed the Nifty.    Overall,  the market
was subdued.

Now,  Crimea has voted in favour of Russia in a referendum.    The US and EU
are preparing to slap sanctions on Russia.    Depending on the nature of the 
sanctions,  the yellow metal may remain firm and equities may remain under 
pressure this week. 

Market Synopsis

Market is showing signs of strong bullish sentiment partly on account of 
healthy Q3 CAD (current account deficit) number at $4.2 billion and partly
on account of probable BJP led ruling coalition at the centre in the upcoming
elections.    India is also offering a better investment destination as compared
to China within the Asian region and also amongst the fastest growing nations
in the world.

The nervousness with regard to the murky shadow banking system in China
and its likely fallout,  is working in India's favour.

The Dragon Falters

The heavy selling pressure in the Chinese Yuan continues unabated.    This may cause unwinding
of the Yuan carry trade at some point of time.    This development coupled with the acceleration,
if undertaken by the US Federal Reserve Bank,  of tapering of the Quantitative Easing program
could trigger a cascading effect in the global markets.

Carry trades involve borrowing funds in a nation with low interest rates to purchase high yielding
assets elsewhere.    The initial cracks in the Chinese shadow banking system appears to be
surfacing.    The dragon is stumbling.

Weekly Outlook

Last week saw some significant selling in the Chinese Yuan.    Now that the G20 choosing to look
away at the concerns of the emerging economies with regard to market volatilities,  the latter shall
continue to remain vulnerable to capital outflows.

Now that the Vote on Account is behind us,  there appears to be no significant domestic trigger
except for the data points like the IIP,  etc.    In the light of the above,  global cues will drive Indian
markets.

Finally,  it appears that Nifty may see significant spike in volatility going forward.