Global traders taken for a roller coaster ride

US Markets exactly did what BSE Sensex was trying to do yesterday, but with a positive close. A Goldman Sach report confirms a US recession in the FY 2008. What is a recession? A country is said to be in recession if the last two quarters of a year witnesses negative real economic growth or a decline in GDP(gross domestic product).But US defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months" . Signs of recession : Increase in UnemployementDecrease in new investmentsDipping corporate profitsEither steep fall in prices or sharp rise of pricesWhere does US Stand in terms of RecessionAs one famous economist said "Recession can only be identified after 6 months to 1 year into the recession". The recent big jump in unemployment data in the US raised a concern among the die hard supporters of a flamboyant economy.Increase in Unemployement in december quarter is an indicator towards recession.We do not see a decrease in new investments despite of corporate profit slow down.There are no signs of any deflation or inflation at this point of time.While housing is the weak link Tech companies look promising as ever.Taking a leaf from the US markets Indian markets are likely to move up further and 21k is definitely possible. Tech stocks are looking solid and the Q3 numbers from IT companies IGATE and Mastek came out strong. We expect the IT pack to outperform the market with the second rung taking the lead. Midcaps will continue to reel underpressure for some more time thanks to the earlier Euphoria many stocks are trading way above the fundamentals. Large caps will tested for performance though intial results from companies like Axis bank looks good. We believe Large cap valuations are at par and major moves are only in case of positive surprises but liquidity is likely to drive markets crazy soon. Watch for another round of feast from midcaps in the next 10 days.