Have the clouds of gloom dissipated?

That global financial markets have witnessed tremendous turbulence over the past 6 months isnt an understatement by any stretch of imagination. Though the markets seem to be on a path to recovery, the pain for investors isnt likely to evaporate anytime soon. The financials sector continues to hog the limelight, the news of a possible stake sale in Lehman Brothers and the seperation of its investment bank and wealth management by UBS AG, the world's largest wealth manager being two prominent recent developments within the sector.

Like i had written in one of the earlier posts, the Dollar seems to be holding onto its gains against the major currencies. The strength in the greenback has seen another asset class featured regularly in the headlines recently, Commodities. The sector has witnessed a fall across the board, with Crude oil leading the way. Apprehensions over rising inflation in several countries due to higher commodities prices have eased significantly. Is it the end of the Commodities story? I beg to differ, instead see these moves as an adjustment to expectations of a sharper deceleration in global economic growth. It looks more like a correction within a "supercycle" of which we might have seen one leg already, definitely there's more to come. Higher commodity prices are needed to ensure a supply side response and providing an impetus to the discovery of alternative supply sources. Given the present macro economic picture, the weakness in commodity prices looks set to continue in the near term, though it could be a different picture over the next 9-12 months.

An easing of nerves has also been seen in the Indian equity markets as the benchmark BSE Sensex has gyrated in a range between 14000-16000 in the near term. Is the pain a thing of the past for the Indian stock market? Well not quite yet, owing to two major factors namely Inflation and the upcoming general elections in 2009. Inflation continues to be a worry for the Indian government,however the sharp slide in crude oil prices has eased the pinch a little. However that doesnt mean the tightening cycle in India is over, we could be in for another round of interest rate hikes though this time the hikes could be of a lower magnitude. The markets could be in a wait and watch mode till the formation of the new government at the Centre, as it would provide clarity on the future course of economic policy.

Finally some light seems to be emerging at the end of the tunnel, as of now it seems more like a ray of hope which could further brighten with the passage of time. The rocky ride experienced by investors earlier has become a little less bumpy, though we could yet be a far distance away from a smooth ride on.