Market's resilience will be put to test this week

The newly-found resilience in equities may be put to test this week, with investors showing reluctance to ride the recent bullish wave ahead of the March quarter results and general elections in April and May. After the 22% rally in benchmark indices in the past couple of weeks, investors fear whether there is any space to accommodate more upsides due to unpredictability about the outcomes of these upcoming events.

Also, with fears about the global economy and financial system far from over, the wider consensus is that a bull market is still some time away. But, market participants hope that the recent steps by the US government to revive the financial system is keeping the undertone positive for the moment.

“People were genuinely fed up of the market coming down again and again. Now they see a glimmer of hope in the US government’s plans to stabilise the financial system,” said George Moller, CEO of Dutch AMC, Robeco Group.

Mr Moller, however, warned that the execution of America’s package contains lot of risks. “As soon as there are indications that the US government’s auction process is going well, markets will rise,” he said.

Mr Moller expects the global economy to be back on its feet only in 2011, and sees the equity markets responding to it a year before . On Friday, US equity indices ended roughly 2% lower.

Back home, developments in political circles in the last few days have heightened the uncertainty about the results of the general elections. With chances of the coalition - consisting of the Left parties - coming to power increasing, analysts said investors are confused and are increasingly staying on the sidelines. It is feared that this coalition would introduce policies that are not marketfriendly .

“As there is now more than a reasonable chance of a third front government coming to power, the Left agenda is likely to play an important role,” said Credit Suisse in a recent report.

Brokers said investors may need to gear up for some disappointments in the March quarter results of Indian companies, especially with the economic data hardly signalling any improvement in business activities. There are concerns about sharp write-downs , especially for small companies, which may precipitate losses in the quarter.
Source: ET