Global markets to dictate trend

The market is likely to extend losses, next week, as investors play it safe and lock in profits on a two-month rally after turbulence in global markets and in preparation from some large equity issues. A solid surge in April 2007 and May 2007 took Sensex to 14570.75 on 1 June 2007, its highest level in almost four months. From that high, Sensex has lost 506.94 points or 3.4% at current 14063.81.

The response to the DLF IPO, which opens next week, may dictate the trend, it being a large IPO.

The domestic bourses are also likely to follow trend on global markets. Asian stock markets are likely to be on the defensive in the week ahead as investors keep a close eye on global bond yields, which have risen sharply on fears interest rates around the world are heading higher. Loftier yields make bonds attractive relative to stocks and also lift long-term borrowing costs for companies, factors that could prompt stock investors to lock in some of the rally that has driven many Asian markets to record highs.

Reality major DLF is mopping up between Rs 8,750 crore and Rs 9,625 crore at the proposed price band of Rs 500 - Rs 550 per share. DLF IPO opens for subscription on Monday, 11 June 2007 and ends on Thursday, 14 June 2007. ICICI Bank had, on 15 May 2007, filed a draft prospectus with Sebi to seek approval for raising Rs 17,500 crore through an equity issue in the domestic and overseas market.

There are some supportive factors for the market. A fall in the rupee from nine-year highs against the dollar in late May 2007 has sparked interest in export-oriented outsourcing firms, which have been under pressure due to concerns their profits would be hit by the currency strength.

Shree Ashtavinayak Cine Vision, Hercules Hoists, Veejay Lakshmi Engineering Works, Precision Wires India and Glenmark Pharma will unveil Q4 March 2007 results on Monday, 11 June 2007. The board of Glenmark will also consider stock split proposal along with Q4 results.

On Tuesday, 12 June 2007, RPG Life Science and Berger Paints are slated to unveil Q4 results. The next day Wyeth, Bimetal Bearings and EIH Associated Hotels will unveil Q4 numbers.

Hind Rectifiers and LG Balakrishnan & Bros will unveil Q4 results on Thursday, 14 June 2007. Shipping Corporation of India, Royal Orchid Hotels, EIH, and Elecon Engineering Company will unveil Q4 results on Friday, 15 June 2007. The board of Elecon Engineering will also consider bonus issue proposal along with Q4 results.

Meanwhile, the Q1 June 2007 corporate earnings season will kickstart from about a month from now and, over the next few days, traders are likely to build positions based on Q1 results expectations. The Q4 corporate earnings were strong which had helped trigger a solid surge in domestic bourses since early April 2007.

Over the next few months, the progress of the July-September monsoon will hold key. The weather office said in April 2007 that this year’s monsoon was likely to be 95% of the long-term average, with a 5% margin of error. The annual monsoon is vital for India’s economic health as it is the main source of water for agriculture, which generates more than a fifth of the gross domestic product.