Uptrend may continue on strong FII inflow

The ongoing liquidity driven rally is likely to continue in the week ahead. The results announced so far have been good, with the exception of IT sector. Key Q1 results next week are Bharti Airtel, ONGC, Maruti Udyog. Reliance Industries (RIL) announces results at the weekend i.e. on Saturday, 28 July 2007.

ONGC unveils Q1 results on Wednesday, 25 July 2007, to be followed by Bharti Airtel and Maruti Udyog on Thursday, 26 July 2007.

The 30-share BSE index has hit 12 all-time highs in 15 sessions so far in July 2007, including one on Friday, 20 July 2007.

Besides good corporate earnings in a fast growing economy, the rise in the value of the Indian rupee against the dollar has attracted foreign funds. FII inflow in the first half of July 2007 reached Rs 21451 crore (till 19 July 2007). The large inflows this month are also due to FII subscription to IPOs of DLF and ICICI Bank.

Receding fears of rising interest rates have aided the surge on the domestic bourses over the past few days. Inflation is hovering at a little above 4%. Inflation has remained below the RBI’s targeted level of 5% in recent weeks. It fell to a 14-month low of 4.03% in mid-June 2007. Annual inflation hit 6.69% on 27 January 2007, the highest in more than two years.

The trend in other Asian markets will continue to have a bearing on domestic bourses. Asian markets may open on a subdued note early next week after China raised interest rates on Friday, 20 July 2007, in the latest of a series of tightening steps aimed at keeping inflation in check and preventing the world's fourth-largest economy from overheating.

The announcement came after trading hours in key Asian markets including the Chinese markets on Friday, 20 July 2007. The People's Bank of China ordered an increase of 0.27% in commercial banks' benchmark one-year deposit and lending rates.

Ahead of the rate hike by China, the MSCI's measure of Asia Pacific stocks excluding Japan hit a record on Friday, 20 July 2007, on the back of strong earnings including South Korean mobile phone maker LG Electronics.