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Wednesday, February 21, 2007

Weakness may continue


Caution may continue today ahead of the outcome of the policy meeting of Bank of Japan (BoJ). Analysts are divided over whether it will lift rates to a decade-high of 0.5% from 0.25% currently.

Japanese stocks were flat on Wednesday (21 February) ahead of the outcome of BoJ meeting. Japan’s Nikkei average was flat at 17,937.74. Hong Kong’s Hang Seng was up 0.2% and Singapore’s Straits Times index was up nearly 1%.

Volatility may remain high ahead of the expiry of February 2007 derivatives contracts on Thursday 22 February 2007. On Tuesday 20 February, Nifty February 2007 futures settled at 4118.60 compared to spot Nifty closing of 4106.95. Nifty March 2007 futures settled at 4115.95 compared to spot Nifty closing of 4106.95.

As per provisional data, FIIs were net buyers to the tune of Rs 345 crore on Tuesday, the day when Sensex had lost 150 points. FIIs were net sellers to the tune of Rs 474 crore in index-based futures on Tuesday. They were net sellers to the tune of Rs 34 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.

US stocks rose on Tuesday as investors scooped up recently battered tech shares amid a flurry of merger deals, including one between Sirius Satellite Radio and XM Satellite Radio and oil prices eased.

The Dow Jones industrial average gained 19.07 points, or 0.15 percent, to a record 12,786.64. The Standard & Poor's 500 Index added 4.14 points, or 0.28 percent, to 1,459.68. The Nasdaq Composite Index climbed 16.73 points, or 0.67 percent, to 2,513.04. The Dow earlier touched 12,795.93, a new intraday lifetime high for the average.

US crude prices fell for a third day, down 22 cents to $58.63 a barrel after a cold spell in the world's top consumer ended, with some forecasters expecting moderate March weather.