The market is on a roll due to strong growth in corporate earnings in a booming Indian economy. On Wednesday 7 February 2007, the two key indices, the Sensex and the Nifty, set their third records in the last four trading sessions. The government on Wednesday estimated GDP growth of 9.2% in the financial year ending March 2007, above RBI’s forecast between 8.5 - 9%, spreading more cheer in the market.
Although the RBI raised short-term interest rates by 25 basis points in its quarterly monetary policy review on 31 January 2007, it also raised its GDP growth forecast for the current fiscal year. A day before, ratings agency Standard & Poor's (S&P), on 30 January 2007, raised India's sovereign local currency credit ratings to investment grade BBB-/A-3, with a stable outlook, citing strong economic prospects and an improving fiscal situation.
A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities. FIIs have stepped up buying following the S&P upgrade. Their inflow was Rs 1665.60 crore in three trading sessions, from 2 February to 6 February 2007. As per provisional data, FIIs were net buyers to the tune of Rs 543 crore on 7 February, the day when Sensex had surged 165 points.
FIIs were net buyers to the tune of Rs 328 crore in index-based futures on 7 February. They were net sellers to the tune of Rs 70 crore in individual stock futures on that day
The near-term trend on the bourses will be determined by expectations regarding the Union Budget 2007-08. Market men expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget. According to a pre-budget report of Man Financial, though the 10% surcharge on corporate tax may be eliminated, the effective tax burden for corporates may go up if certain open-ended exemptions are removed.
Asian markets were mostly in the red on Thursday 8 February 2007. Key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan were down by between 0.31% to 1.3%. Japan’s Nikkei 225 average was up 0.26%.
US technology stocks rose on Wednesday as Cisco Systems' profit and outlook reinforced optimism over earnings, while blue chips ended little changed as the slump in oil prices weighed on energy plays. The Dow Jones industrial average inched up just 0.56 of a point to end at 12,666.87, after earlier touching an intraday record high at 12,700.28. The Standard & Poor's 500 Index gained 2.02 points, or 0.14 percent, to finish at 1,450.02, just shy of its six-year high at 1,452.99 reached earlier in the day, while the Nasdaq Composite Index climbed 19.01 points, or 0.77 percent, to close at 2,490.50.
Crude oil futures for March delivery rose 16 cents to $57.87 a barrel on Thursday after falling more than a dollar in overnight trade.