The market may edge lower following reports that the Income Tax department in Mumbai is conducting raids on 40 entities including stock brokers, builders and medical professionals. The raids began early morning.
However, downside will be limited due to stepping up of inflow by foreign institutional investors and due to firm Asian markets. Volatility is likely ahead of expiry of February 2007 derivatives contracts. February 2007 derivatives contracts expire today.
On Wednesday 21 February, Nifty February 2007 futures settled at 4108.85 compared to spot Nifty closing of 4096.20. Nifty March 2007 futures settled at 4100.70 compared to spot Nifty closing of 4096.20.
FIIs have stepped up buying Indian equities again. FIIs were net buyers to the tune of Rs 473.90 crore on Tuesday (20 February 2007), which was much higher than the inflow of Rs 220.20 crore on 19 February 2007. FIIs had stepped up buying since the onset of February 2007, but turned austere later. The FII inflow was a robust Rs 2909.90 crore in five trading sessions, from 2 February 2007 to 8 February 2007. The strong inflow was triggered by an upgrade in India's sovereign rating to investment grade by global rating agency, Standard & Poor's, on 30 January 2007.
But as per provisional data, FIIs were net sellers to the tune of Rs 198 crore on Wednesday 21 February. FIIs were net sellers to the tune of Rs 385 crore in index-based futures on Wednesday. They were net sellers to the tune of Rs 175 crore in individual stock futures on that day.
A key trigger for the market in the near-term is Union Budget 2007-08. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The previous budget had increased STT. The removal of a 10% corporate surcharge may be offset by removal of certain open-ended exemptions. Market men also expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.
Asian markets were firm on Thursday 22 February. Key benchmark indices in Hong Kong, Japan, South Korea and Singapore were up by between 0.21% to 1%. Japan’s Nikkei average was up 1% led by exporters as the yen hit a record low versus the euro and fell against the dollar after Bank of Japan (BoJ) signalled future interest rate rises would be slow in coming. BoJ on Wednesday raised interest rates to 0.5% from 0.25%.
US blue chip stocks fell on Wednesday after stronger-than-expected inflation data stirred interest-rate worries. But the Nasdaq ended at a six-year high as investors snapped up Apple Inc. and other recently pummeled technology shares, believing the sector may offer the best earnings growth. The Dow Jones industrial average fell 48.23 points, or 0.38 percent, to end at 12,738.41 -- a day after it closed at yet another record. The Standard & Poor's 500 Index dipped 2.05 points, or 0.14 percent, to finish at 1,457.63. The Nasdaq Composite Index rose 5.38 points, or 0.21 percent, to 2,518.42, its highest close since March 2001.
US crude shed 8 cents to $59.99 a barrel on Thursday after soaring on Wednesday on a slew of supply snags in the United States and tension over oil producer Iran. Data due later in the day is forecast to show U.S. distillates stocks fell 1.3 million barrels last week after a snowstorm hit the Northeast.