Market may extend gains

The market made a strong comeback on Thursday 8 March 2007 when Sensex surged 470 points to move past 13000. Strong Asian markets triggered a rebound on the domestic bourses, which had seen a huge value erosion over the past few days. Short-covering in derivatives aided the surge.

The key economic data today is that on wholesale price inflation. The inflation rate is forecast at 6.03% for the 12 months to 24 February 2007, marginally down from 6.05%. Indian stocks had tumbled in the last few days due to a sell-off in global markets, with the disappointing Union Budget 2007-08 of 28 February 2007 only compounding their woes. The fall was accentuated as margin calls were triggered.

Mutual funds are sitting on cash thanks to collections from some of the recent new fund offers and they may step up purchases on declines. However, the latest data showed that mutual funds, in fact, stepped sales – they pressed sales worth a net Rs 379.56 crore on Wednesday 7 March 2007, the day when Sensex had lost 177 points in volatile trade.

FIIs have resumed buying since the past two day after their heavy sales since late February 2007. However, the quantum of their inflow is muted. They were net buyers to the tune of Rs 84 crore on Wednesday. As per provisional data, their inflow was Rs 60 crore on Thursday, the day when Sensex had spurted 470 points.

Recently trading sessions have also seen FIIs step up buying in index-based futures. They were net buyers to the tune of Rs 948 crore in index-based futures on Thursday. They were net buyers to the tune of Rs 198 crore in individual stock futures on that day. The Nifty March 2007 futures settled at 3754.15 on Thursday, a discount of 7.50 points over spot Nifty closing of 3,761.65.

Asia-Pacific markets were mixed on Friday. Key benchmark indices in Australia, Japan, and Singapore were up by between 0.1% to 0.4%. Benchmark indices in China, Hong, South Korea and Taiwan were down by between 0.07% to 0.47%.

Wall Street extended its recovery from last week's big plunge, rising Thursday after several stable sessions helped buttress investor sentiment and allay some concerns about the economy. The Dow closed up 68.25, or 0.56 percent, at 12,260.70. The Standard & Poor's 500 index climbed 9.92, or 0.71 percent, to 1,401.89, and the Nasdaq composite index advanced 13.09, or 0.55 percent, to 2,387.73.

The European Central Bank (ECB) on Thursday raised as widely expected its key interest rate to a new five-year high of 3.75 percent and signalled no immediate end to monetary tightening. On the other hand, Bank of England left rates unchanged.

Oil prices were nearly flat in Asian trading Friday as market participants looked for a trading cue from US employment data due later in the day. Light, sweet crude for April delivery dropped 10 cents to $61.54 a barrel in electronic trading on the New York Mercantile Exchange midmorning in Singapore.