High oil prices and weak Asian markets may pull domestic bourses lower today. Unwinding of positions in derivatives segment ahead of expiry of March 2007 derivatives contracts on Thursday 29 March 2007 had pulled Sensex down 162 points on Monday 26 March 2007. The market remained closed on Tuesday 27 March on account of public holiday.
Asian markets were in the red on Wednesday (28 March) following overnight fall in US stocks on Tuesday. Key benchmark indices in China, Japan, South Korea, Singapore, Hong Kong and Taiwan were down by between 0.15% to 2.5%.
US stocks and the dollar closed lower on Tuesday after a measure of US consumer sentiment dipped and a major home builder withdrew its profit outlook, reinforcing the view the US economy is on shaky ground. The Dow Jones industrial average dropped 71.78 points, or 0.58 percent, to finish at 12,397.29. The Standard & Poor's 500 Index slid 8.89 points, or 0.62 percent, to end at 1,428.61. The Nasdaq Composite Index lost 18.20 points, or 0.74 percent, to close at 2,437.43.
A crisis in the US subprime mortgage sector, which issues mortgages to high-risk borrowers, has left investors wondering whether the broader housing sector, and even the world's largest economy, might be dragged down as well.
Crude oil futures jumped to their highest levels in six months in after-hours trading in New York on Tuesday on market rumors of military action in the Gulf, but the White House said it was unaware of any incident. NYMEX crude oil futures shot up more than $5 to trade above $68 a barrel, the highest price for front-month since Sept. 6, 2006, on geopolitical concerns over Iran. The prices had later pulled back, trading up $1.59 at $64.50 a barrel.
At home, the government has a final say on retail petrol and diesel prices, and in fact had cut prices of auto fuels recently in a bid to combat inflation. In mid-February 2007, price of petrol was cut by Rs 2 a litre, while diesel became cheaper by Re 1 a litre.
FIIs are buying mode since the past few days. As per provisional data, FIIs were net buyers to the tune of Rs 58 crore on Monday 26 March, the day when Sensex had lost 162 points. FIIs were net buyers to the tune of Rs 678.50 crore on Friday 23 March, the day when Sensex had lost 22 points.
The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008.