Most of the markets have look to be in extremely oversold zone. I think at present a small infusion of liquidity can raise the market, but somehow market will find it difficult to sustain gains. Present rally may fade by April but in the second half of 2008 it will be more durable.
The only reason with US to take some breath is strong exports due to dollar devaluation.US Consumer Confidence is down sharply and will remain subdued for the next few months. The housing market is in a bad shape. The default rate may go up to 20%. However, most of the US sub-prime write downs have already been accounted for. But anyhow, the uptick in the off shoring market turns out to be a positive for India.
Though food and energy prices are driving inflation and core inflation is not as high, but then also inflation over 7% will be bad and market may not be prepared for that Moreover, the impact of earnings season will also be key market sentiment driver.
So on whole growth has moderated but that has happened from very high levels. However, growth divergence will persist and will continue to bring FII money into India. In Asian Markets downside risk is limited but in shorter we can see this rally fading away soon.
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