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Global cues cure for Monday blues

Investors are advised to be watchful till there is clarity on the direction of global markets, reports MC Vaijayanthi.

business Updated: Aug 18, 2007 00:08 IST
MC Vaijayanthi

Asian markets closed in the red even as European markets opened positive. But the good news was yet to come. The US Federal Reserve intervened and cut the interest rate on the short loan it gives to banks by 50 basis points, pushing the Dow Jones up by 200 points.

5 days that shook Asian bourses

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It was the worst week in 17 years for Asian stocks as a mounting credit crisis forced investors to shun equities.

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The Morgan Stanley Capital International Asia-Pacific Index fell 3.6% on Friday, losing 8.1% this week, the most since September 1990.



In the domestic markets the S&P CNX Nifty, the National Stock Exchange’s 50-share index, tested the 200-day moving average on Friday as it dipped to 4,002.20 intra-day. The futures contract on the Nifty index is a heavily traded instrument and when it breached the 200-day average there were obvious signs of worry. “The fact that the Nifty closed above that level is a good sign,” said Manas Jaiswal, technical analyst at Emkay Shares.



This technical chart here and the Fed rate cut at the global level are the two points of hope that markets may open positive on Monday. Despite the recovery in Hong Kong and Europe, which pulled up the Indian index from the abyss it had fall into, not many expect the markets to open better on Monday.



Investors are advised to continue with a watchful approach till there is clarity on the direction of global markets. “There are good days and there are bad days. Investors must sell on good days,” advised Arun Kejriwal of KRIS Research.



Disturbance in the global market was bound to affect fund flows and a further fall was imminent, said a member of the National Stock Exchange. “Stocks whose prices were inflated have fallen the most and it is better to let the stocks correct to appropriate levels instead of trying to hold them up artificially,” he said.



Traders who had sold short on Thursday moved in to cover their positions as signs of recovery emerged in Asian and European markets. “Lots of traders are stuck heavily in the Nifty derivatives trade, one reason why we feel the market can go down further. And the US market is still not showing signs of stability,” said Sapan Patel, JNP Shares.



Among the Sensex stocks, five stayed in green while the rest continued to roll in the red. Technology stocks suffered losses as fears of the impact of the US sub-prime mortgage crisis weighed on investors. Foreign institutional investors effected net sales of Rs 2,849 crore worth of securities on Thursday and close to Rs 3,500 crore in three trading sessions.