Domestic bourses may take cue from weak global markets

A much-needed correction may set in today as domestic bourses may take cue from weakness across global bourses. The near term trend on the bourses would be determined by the extent of rollover to December 2006 contracts from November contracts ahead of expiry of November contracts this Thursday (30 November). Derivatives positions are quite large.

The market has witnessed a solid surge over the past few weeks and the rally has materialized without any worthwhile correction. Sensex has risen 46.5% this year, making it Asia's best performing market.

Asian shares fell on Tuesday as fears about lacklustre holiday spending in the key US market and a weak dollar prompted investors to sell technology exporters such as Canon and Samsung Electronics. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 0.5% to 1.8%. Barring Taiwan, key benchmark indices in four other above mentioned markets were down by over 1% each.

US stock indexes sank on Monday, registering their worst day in months, amid concern about Google Inc.'s valuation and doubts about holiday spending after a disappointing sales estimate from Wal-Mart Stores Inc. In addition, downward pressure on the dollar for a fourth straight day hurt demand for US investments, while a rise in crude oil prices above $60 a barrel added to concerns about consumer spending. The Dow Jones industrial average fell 158.46 points, or 1.29 percent, to end at 12,121.71. The Standard & Poor's 500 Index lost 19.05 points, or 1.36 percent, to finish at 1,381.90. The Nasdaq Composite Index slid 54.34 points, or 2.21 percent, to close at 2,405.92.

Worries about consumer spending in the United States were exacerbated as oil prices climbed further above $60 a barrel after forecasts of a cold spell in the US Northeast and as a key OPEC member held out the prospect of further supply cuts. NYMEX crude for January delivery rose 15 cents to $60.47 a barrel, building on Monday's gains.

Meanwhile, large daily FII figures indicate that there have been simultaneous entries and exits. This in turn indicates of different strategies being adopted by various FIIs operating in India. This also suggests churning of portfolios. On a net basis, there has been stepping up of inflow by FIIs over the past two months. Their inflow totaled Rs 9372.80 crore in November 2006 (till 24 November). The inflow was Rs 8013 crore in October 2006. The inflow was Rs 1145 crore in July, Rs 4643.10 crore in August and Rs 5425 crore in September. The cumulative inflow for calendar 2006 has totaled $8.5 billion. The inflow was a record $10.7 billion 2005.

Mutual funds were net sellers for the second day in a row on Friday 24 November. Mutual funds sold shares worth a net Rs 212.73 crore on 24 November compared to their outflow of Rs 276.24 crore on 23 November.