The July derivatives series was a remarkable one. It set many benchmarks. For one, it proved that the market was capable of dealing with Rs 1 lakh crore of outstanding positions. It proved that the market could absorb $8 billion of primary paper without breaking into a sweat and it set an all-time record for foreign institutional investment flows, at $6 billion. All of this while it took out all-time highs, cruised above 15,000, notching a 7 per cent gain during the series. Simply amazing. Tough act to follow, too. August has its job cut out.
July was a frenetic month of earnings as well. August will be a month of reflection. It was a crucial earnings season and investors will have to take stock and read the road signs. There have been hits and misses this quarter. If, however, the final analysis shows that there is no marked slowdown just yet, stock prices may remain supported. The monetary policy announcement will be important, too. The market is hoping to pick up some hint of rate softening from the Reserve Bank of India governor, if that comes through, sentiment will get another boost.
Finally, it will boil down to liquidity and global sentiment. Thanks to the July rush, FII flows for 2007 are soaring towards the $11 billion mark, already. Will the tap remain open in August? Tough to say. Globally, too, the cries for a correction are getting more and more shrill with every passing day. An element of disbelief is beginning to creep in at the unbroken nature of this run. These things are impossible to time, so whether it will get better before the inevitable correction sets in is anyone's call. Either way, the stakes are high for the August series.
(The writer is Executive Editor, CNBC-TV 18)