Market may extend gains

The market may extend gains tracking firm global markets. However upside may be capped with data showing that FIIs were net sellers on Monday 19 March 2007. On that day Sensex had jumped 215 points in a rally across Asian stocks. FIIs were net sellers to the tune of Rs 5 crore on that day, as per provisional data released by the National Stock Exchange (NSE).

Volatility may rise over the next few days ahead of expiry of March 2007 derivatives contracts next Thursday 29 March 2007. As the markets are closed next Tuesday (27 March) due to public holiday, only 7 trading sessions are left for expiry of March 2007 contracts.

FIIs were net buyers to the tune of Rs 353 crore index based futures on Monday 19 March. They were net sellers to the tune of Rs 133 crore in individual stock futures on that day.

The undercurrent remains cautious due to high inflation and rising interest rates. Strong industrial production data released early last week means that RBI may raise interest rates at its annual policy review for the year 2007-08 next month (on 24 April 2007). Industrial output rose 10.9% in January 2007 from a year earlier. The wholesale price index rose 6.46% in the 12 months to 3 March 2007, up from the previous week's annual increase of 6.10% due to higher edible oil and naphtha prices.

The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Market men will closely watch what company managements have to say about the outlook for FY 2008.

In the near term, domestic bourses would track global bourses as central banks in Japan and US hold a meeting to decide on interest rates. Global liquidity still remains strong.

As per reports which have just filtered in the market, the Bank of Japan (BoJ) has unanimously voted to keep interest rates unchanged at 0.5%. The focus is now on BoJ Governor Toshihiko Fukui's post-meeting news conference for indication on future rate hikes.

US Federal Reserve’s two-day meeting ends on Wednesday. The Fed is expected to keep interest rates unchanged. Analysts keenly await the Fed’s accompanying statement for cues to the US economic outlook.

US stocks rallied on Monday after Britain's Barclays Plc and Dutch bank ABN AMRO confirmed they were in talks to merge, helping the financial sector recover from its recent hammering in the subprime mortgage market turmoil. The Dow Jones industrial average ended up 115.76 points, or 0.96 percent, at 12,226.17. The Standard & Poor's 500 Index closed up 15.11 points, or 1.09 percent, at 1,402.06. The Nasdaq Composite Index finished up 21.75 points, or 0.92 percent, at 2,394.41.

Asian markets edged higher for the second day in a row on Tuesday. Key benchmark indices in Hong Kong, Japan, Singapore and Taiwan were up by between 0.4% to 1.1%