Market may recover on firm Asian equities

The market may edge higher tracking Asian markets which were mostly in the green. However, upside may be capped due to data showing lacklustre FII activity over the past two trading sessions.

Although FIIs resumed buying on Thursday (15 March 2007), their daily volume as reflected in daily gross sales and purchases figures for the day was low. They were net buyers to the tune of Rs 18.50 crore on Thursday (15 March 2007) compared to their outflow of a huge Rs 861.40 crore on 14 March. An intermittent surge in funds withdrawal by FIIs has been observed this month. As per provisional data released by the National Stock Exchange, FIIs were net sellers to the tune of Rs 202 crore on Friday 16 March, the day when Sensex had lost 113 points.

FIIs were net sellers to the tune of Rs 563 crore in index-based futures on Friday. They were net buyers to the tune of Rs 104 crore in individual stock futures on that day. Nifty March 2007 futures settled at 3582.30 on Friday, a discount of 26.25 over spot Nifty closing of 3608.55.

The settlement for trading done on Friday 16 March and today’s trading has been clubbed on 21 March 2007 due to bank holiday today on account Gudhi Padva. Therefore, brokerages have advised clients that shares bought on Friday 16 March should not be sold on 19 March 2007.

The next major trigger for the bourses is Q4 March 2007, earnings which will start next month. Market men will closely watch what company managements will have to say about the outlook for FY 2008. Global liquidity still remains strong and may provide the trigger for recovery.

High inflation remains a cause for concern. 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, data showed on Friday. The figure was higher than an expected 6.31%.

Finance Minister P Chidambaram said on Friday the government had asked the central bank to take monetary steps necessary to maintain price stability. "When I met with the central board of the RBI recently I pointed out ... and urged the RBI to continue to be vigilant and take such measures as are necessary to maintain price stability," Chidambaram told the Lok Sabha.

Asian stocks nudged higher on Monday with the markets shrugging of a hike in interest rate by China’s central bank on Saturday 17 March 2007. China's main share index opened down more than 2 percent, but soon regained its poise to trade in positive territory. It was up 1.6%. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.38% to 0.83%.

US crude oil rose 19 cents to $57.30 a barrel, after falling as far as $56.17 last week on worries of an economic slowdown in top consumer the United States.

US stocks fell on Friday as data showing strong consumer price inflation dented hopes for an interest-rate cut any time soon, while fears about the subprime mortgage crisis kept investors on edge. A government report showed overall February consumer prices rose faster than analysts estimated, while core CPI, which strips out volatile food and energy costs, matched forecasts. The Dow Jones industrial average fell 49.27 points, or 0.41 percent, to end at 12,110.41. The Standard & Poor's 500 Index dropped 5.33 points, or 0.38 percent, to 1,386.95. The Nasdaq Composite Index slipped 6.04 points, or 0.25 percent, to 2,372.66.

Central banks in Japan and US meet this week to decide on interest rates. Bank of Japan’s two-day meeting ends on Tuesday while US Federal Reserve’s two-day meeting ends on Wednesday. Fed is expected to keep interest rates unchanged. Analysts are keenly awaiting Fed’s accompanying statement for cues about US economic outlook.