Market may remain range bound

Volumes were muted when Sensex had tumbled 617 points on Monday 2 April 2007 when an unexpected interest rate increase rattled investors. The volume of shares of 16.3 crore on BSE on Monday was much lower than average daily volume of 21.85 crore shares in March 2007 and 31.31 crore shares in February 2007.

The Reserve Bank of India lifted its short-term lending rate by 25 basis points to 7.75 percent, its highest in nearly 4-½ years, after markets had closed on Friday (30 March) to fight inflation. It also raised the cash reserve ratio, or proportion of cash banks have to hold with the central bank on deposit, by half a percentage point to 6.5 percent in two stages that would drain Rs 15500 crore from the banking system.

FIIs pressed substantial sales on Monday. As per provisional data, FIIs were net sellers to the tune of Rs 509 crore on that day. FIIs were net sellers to the tune of Rs 1432 crore in index based futures on that day. They were net sellers to the tune of Rs 106 crore in individual stock futures.

Lack of buying may keep the market sluggish in the near term. Institutional investors may remain on sidelines ahead of the beginning of the earnings reporting season. Infosys kickstarts the Q4 March 2007 earnings season on 13 April 2007. Traders/operators may start building positions in individual stocks based on Q4 results expectations.

The major trigger for the market is FY 2008 (year ending 31 March 2008) guidance by IT bellwether Infosys. Infosys will unveil its FY 2008 guidance along with the Q4 March 2007, results on 13 April 2007. In a recent pre-guidance report on Infosys, Merrill Lynch placed a short-term 'sell' on the Sensex heavyweight as its expects a conservative guidance from it due to an uncertain US economic outlook, the appreciation of the rupee versus the dollar and other client-specific issues. Merill Lynch expects Infosys to give EPS growth guidance in the early 20s

Asian markets were steady to firm on Tuesday 3 April. Key benchmark indices in Hong Kong, China, Japan, Singapore and Taiwan were up by between 0.26% to 0.93%.

US stocks ended higher on Monday as a $26 billion buyout deal for credit card processor First Data Corp. fueled optimism about valuations, countering worries about weak factory activity and turmoil in the housing market. The Dow Jones industrial average was up 27.95 points, or 0.23 percent, at 12,382.30. The Standard & Poor's 500 Index was up 3.69 points, or 0.26 percent, at 1,424.55. The Nasdaq Composite Index was up 0.62 point, or 0.03 percent, at 2,422.26.

US crude oil futures ended slightly higher on Monday as geopolitical tensions, especially Iran and its disputes over captive British military personnel and Tehran's nuclear program, kept support under already high-priced crude. On the New York Mercantile Exchange, May crude oil rose 7 cents, or 0.11 percent, to settle at $65.94 per barrel.