A further correction is likely with data showing heavy FII sales in the derivatives markets for the second day in a row on Monday (11 December). FIIs were net sellers to the tune of Rs 1250 crore in index based futures on 11 December, the day when Sensex had plunged 400 points. Data showing FII sales of Rs Rs 1,087 crore in index based futures on 8 December and fears of rise in interest rates following RBI’s surprise 50 basis point hike in cash reserve ratio had rattled the bourses on 11 December.
As per provisional data, FIIs were net buyers to the tune of Rs 334 crore in the cash segment on 11 December, the day when Sensex had lost 400 points. They were net sellers to the tune of Rs 152.60 crore on 8 December, the day when Sensex had lost 173 points.
But steady to firm trend in Key Asian markets would cap further downside on the domestic bourses. Japan’s Nikkei was up nearly 1% and Hong Kong’s Hang Seng was up 0.14%. In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.
US stocks edged higher on Monday. The Dow Jones industrial average rose 20.99 points, or 0.17 percent, to close at 12,328.48. The Standard & Poor's 500 Index ended up 3.20 points, or 0.23 percent, to finish at 1,413.04. The Nasdaq Composite Index gained 5.50 points, or 0.23 percent, to end at 2,442.86.
US crude oil for January delivery fell 81 cents, or 1.3 percent, to settle at $61.22 a barrel, while London Brent crude fell 36 cents to $61.84 a barrel.
A major near term trigger for the domestic bourses is Q3 December 2006 results. It is expected to be another quarter of strong performance from corporate India.
Meanwhile, good FII allocations are expected for India in the new calendar year 2007.
The response to the IPO of Cairn India was strong on day one of opening of the IPO on 11 December notwithstanding the sharp fall on the bourses on that day. The IPO received bids for 43.01 crore shares compared to issue size of 32.87 crore. Most of the bidding on the first day was from FIIs. They bid for 42.85 crore shares against 19.72 crore shares reserved for this category in the IPO.