Red ink on the bourses,

Bears are coming back .....

After recording strong gains last year – though punctuated by unprecedented volatility - Indian stock markets have begun the year 2007 on a hesitant note. Are bears coming back? Or is it the usual caution ahead of the earnings season?

Sensex shed over 200 points on Monday, as investors pressed sell button in line with other Asian markets. The fall was led by frontline IT stocks on concerns that the appreciation of the rupee and a slowdown in the US economy might hurt earnings of software. This is the third consecutive day of fall in Indian equity market.

While the 30-share blue-chip index of the BSE today ended 208.37 points down at 13,652.15 (-1.50%), NSE’s Nifty closed 50 points down at 3,933.40 (-1.26%). Besides IT stocks, heavy selling was seen in auto and metal counters. Overall breadth of the market was, however, positive and some buying was seen in mid-cap and small-cap scrips.

The quarterly earnings season kicks off later this week with Infosys results on 11th. While the incoming numbers will drive the sentiments in the coming weeks (and, numbers and guidance are generally expected to be good), there are some uncertainties going ahead. Although economy is expected to post robust growth, there are concerns ranging from high valuations, uncertainty in the metals market to looming interest rate hikes.