Resolution of the crisis in Egypt before the weekend and the concomitant expectations of stable crude oil price levels in the immediate term are likely to have a positive effect on Dalal Street sentiment at the opening of this week.
But in spite of strong wishes of operators and moves by corporate as well as political-crisis managers, the feel-good factor may not last long. The gradual slide of key and broader indices may not be halted in the short term.
Focus of major market movers has clearly shifted to New Delhi's political circus as corruption and governance issues loom large. According to market intelligence, the endgame may be enacted in the next couple of months when the benchmark index would bottom out somewhere between 16,000 and 16,500.
Some investment advisors to and fund managers of FIIs said that the situation is quite alarming; there is an unavoidable heady mix of negatives ahead.
Technical analysts too have cautioned traders. They expect an intermediate downtrend to resume after a brief pullback rally; Sensex and Nifty weekly and monthly charts have not given them any indications to the contrary.
For a section of overseas investors the political risk perception of India is so high now that they are ready to dump holdings and wait indefinitely for a re-entry.
The resulting cascading effect of a large-scale exit may force India to drop out of the growth momentum bandwagon for a while at least.
Retail investors are not amused either. For them, corporate fundamentals and earnings growth in the next few quarters are cloudier than last year.
Even for the die-hard believers of the great India story, the contrarian calls are off. Actions in the ring testify to that.
The 2011-12 Budget announcements could be a tepid affair or a non-event if the dangerous drift is not stalled.
Senior bureaucrats and PSU managers confided to this writer that no divestment is likely till the air is clear and the market bounces back.
“In the past five months India has been gripped by policy paralysis, which has resulted in project sign-offs being held up and big-ticket loan disbursal being retarded. This led to a marked industrial slowdown,” said Mr Saurabh Mukherjea, head of equity at Ambit Capital.
“Until the political gridlock is broken and the Government is back in the business of governance, the market will not rally decisively.”