The market fell steeply after the presentation of the Union Budget 2007-08 on Wednesday (28 February). The government raised taxes for the favourite IT sector. The imposition of taxes on employee stock options (ESOPs) and a hike in dividend distribution tax from 12.5% to 15% added to the general gloom. That equities worldwide were weak did not help. Nifty March futures settled at 3,726 on Wednesday, a discount of 19.30 over the spot Nifty closing of 3,745.30.
A recovery in key Indian ADRs, and a recovery in the US market may support the market today. However, the upside may be capped due to FII-sales. Among key Indian ADRs, HDFC Bank's ADR jumped 5% to $66.36 and ICICI Bank's ADR rose almost 5% to $38.36. Infosys' ADR gained 1.4% to $54.26, while Tata Motors' ADR gained 2.5% to $18.51.
As per provisional data, FIIs pressed huge sales to the tune of Rs 1932 crore on Wednesday, the day when the Sensex tanked 541 points. They were net sellers to the tune of Rs 415.70 crore on Tuesday (27 February 2007) compared to an outflow of Rs 582.10 crore on Monday (26 February 2007).
US stocks bounced back on Wednesday. Their recovery on Wednesday hit its stride after Federal Reserve Chairman Ben Bernanke told Congress there did not appear to be a single trigger for Tuesday's global stock slump. The Dow Jones industrial average rose 52.39 points, or 0.43%, to end at 12,268.63. The Standard & Poor's 500 Index gained 7.78 points, or 0.56%, to finish at 1,406.82. The Nasdaq advanced 8.29 points, or 0.34%, to close at 2,416.15.
Key Asian markets remained weak on Thursday. Key benchmark indices in China, Hong Kong and Japan were down between 0.2 - 1.7%.