Market may drift lower

A sharp fall in volumes was witnessed on Monday (12 March) when the market eked out small gains. Turnover on BSE’s cash segment declined to Rs 3416 crore from Friday (9 March)’s Rs 4339 crore. Turnover on NSE’s derivatives segment declined sharply to Rs 26751.37 crore from Friday’s Rs 34939.39 crore.

Key Asian markets were in the red today and the markets overall were mixed. Key benchmark indices in Hong, Japan, Singapore and South Korea were down by 0.3% each. Key benchmark indices in China, and Taiwan were up by between 0.1% to 0.7%.

US stocks advanced on Monday, helped by deal news, cheaper oil and positive broker comments on the chip sector. The Dow Jones industrial average was up 42.30 points, or 0.34 percent, to end at 12,318.62. The Standard & Poor's 500 Index was up 3.75 points, or 0.27 percent, to finish at 1,406.60. The Nasdaq Composite Index was up 14.74 points, or 0.62 percent, to close at 2,402.29.

Crude oil languished around $59 a barrel on Tuesday after dropping to a three-week low on Monday on warming US weather and comments from OPEC members that were taken as a signal the group would not cut output at a meeting this week in Vienna.

FIIs have resumed buying after substantial sales in late February-early March 2007. As per provisional data, FIIs were net buyers to the tune of Rs 131 crore on Monday (12 March). They were net buyers to the tune of Rs 395.70 crore on Friday (9 March 2007), the day when the Sensex had lost 164 points. FIIs were net buyers to the tune of Rs 115.80 crore on Thursday (8 March 2007), the day when the Sensex had surged 470 points.

FIIs were net buyers to the tune of Rs 865 crore in index-based futures on Monday. They were net buyers to the tune of Rs 49 crore in individual stock futures on that day. Nifty March futures settled at 3727.20 on Monday compared to spot Nifty closing of 3734.60.

Even as mutual funds are sitting on cash, thanks to collections from some of the recent new fund offers, they continue to press sales in equities. Mutual funds were net sellers to the tune of Rs 385 crore on Friday (9 March 2007), the day when Sensex had lost 164 points. They were net sellers to the tune of Rs 40 crore on Thursday (8 March 2007), the day when the Sensex had surged 470 points. They had pressed sales worth a net Rs 379.56 crore on Wednesday (7 March 2007), the day when the Sensex had lost 177 points in volatile trade

The data on industrial production released on MOnday showed industrial production rose 10.9% in January 2007 from a year earlier, lower than a revised annual growth of 12.5% in December 2006. Output in November 2006 was an annual 15.4%, the highest in more than a decade. Manufacturing production, which represents more than 75% of industrial output, rose 11.6% in January 2007 from a year earlier, compared with a provisional 11.9% annual growth in December 2006

There has been a lack of direction on the domestic bourses over the past few days. A recovery of 282 points on 6 March 2007, was followed by a decline of 117 points on 7 March 2007. A solid surge of 470 points on 8 March 2007, was witnessed the next day (on 8 March 2007) which was followed by a decline of 164 points on 9 March.

Earlier, a sell-off gripped bourses in late February-early March 2007 due to setback in global markets, and disappointing Union Budget 2007-08 on 28 February 2007. A sharp fall of nearly 9% in Chinese stocks on 27 February 2007, had spooked global bourses in late February-early March 2007.

The Budget left a lot to be desired. While there was no across-the-board cut in the 10% corporate surcharge as expected, the dividend distribution tax was raised to 15% from 12.5%. The Budget also raised direct/indirect taxes for cement, construction and IT sectors.

The next trigger for the domestic bourses may come from global bourses. US Federal Reserve holds a two-day meet on 20-21 March 2007 to decide US interest rates. The latest US job data helped eased expectations of a possible rate cut by the Federal Reserve.