Market expected to stay sideways

The market is expected to stay sideways on account of mixed cues. However, a correction cannot be ruled out.

The benchmark Sensex witnessed a 183-point (1.26%) correction in the week, from 9 Feb – 15 February 2007. It had touched an all-time of 14,723.88 on 9 February 2007.

A consistent rise in inflation has raised analysts' eyebrows. As per the latest data released on Thursday, India's wholesale price index rose to 6.73% for the week ended 3 February 2007, due to higher food and manufactured product prices.

The Indian government said it was cutting the retail prices of petrol by Rs 2 per litre and diesel by Re 1 a litre. This will put pressure on refining companies, impacting their profitability.

The banking sector is also expected to remain under pressure following the latest 50-basis-point increase in the cash reserve ratio (CRR) by the Reserve Bank of India (RBI). CRR is the percentage of banks' total deposits they have to keep with it.

Volatility is expected to remain high in the week, ahead of the derivative expiry for February, which is scheduled on 22 February 2007.

The market is keenly awaiting the key event, that is the Union budget 2007. It will take direction based on what announcements are made at the annual event.

Hindustan Lever (HLL), Blue Dart Express, SKF India, FCI OEN Connectors, Clariant Chemicals (India), Wockhardt, Astrazeneca Pharma India, Gujarat Gas Company, Bosch Chassis Systems India and R.S. Software (India) will also be announcing their December quarterly results in the next week.

On the global front, the major event scheduled for the next week includes the release of minutes of the last Federal Open Market Committee (FOMC) meeting. The markets will try to find clues about the next move of the US Federal Reserve.

A pessimistic stance by the Fed, suggesting slowing economic growth and easing inflationary concerns, should weaken the US dollar further and assist the already booming global equity markets to appreciate further.