Iraq and monsoon to decide market trend

Markets were extremely volatile on account of the Iraq crisis and moved in both directions before ending the week with loss of under half- a per cent.

The market is expected to witness volatility as traders roll over positions in the futures and options segment while the Iraq unrest and the progress of monsoon will set bourses this week. Besides, trend in global equity markets and investment activity of foreign institutional investors ( FIIs) will play a role in market movement.

The Iraq crisis dominated last week's proceedings and oil is now at the $ 115- mark. The US and Iran talked of intervention but as of date, nothing has materialised.

Markets had a sharp rally on Tuesday with the Sensex gaining 331 points and the Nifty 98s. Markets gave up all the gains by the weekend to close about halfa- per cent down.

The June series futures expire on Thursday. At the current close of 7,511.45 points, the Nifty is up 275.8 points, or 3.81 per cent, from the previous expiry.

The bulls have the upper hand so far, but the Iraq crisis could make things tricky. Markets seem to be struggling to carry on with the momentum of previous months and stuck in a broad range.

They need triggers to make any further decisive move upward or downwards. To become positive they need to cross previous highs of 25,700 on the Sensex and 7,680 on the Nifty. On the converse, while levels are quite some distance away at 24,100 and 7,200 for markets to turn bearish, the momentum would break even if we fall two- to- three from per cent from here.

Railway passenger fares have been hiked by 14.2 per cent while freight rates have been by 6.5 per cent.

This will help generate resources for the beleaguered Railways.

Economists and market participants will welcome the hike as we move closer to eliminating or reducing cross subsidies while politicians and consumers would oppose the same.

News on the inflation front was a little disappointing with wholesale inflation rising to 6.01 per cent against 5.3 per cent in the previous month, a new five- month high.

This will put pressure on the government and the Reserve Bank of India with inflation set to rise further with the railway freight hike.

( The writer is an investment analyst)

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