FII inflow, global markets to dictate trend

Global markets, FII inflow and developments on political front will dictate trend on the domestic bourses in the coming days.

Developments on the political fronts will be keenly watched as analysts feel that Congress, through the truce reached on Indo-US nuclear deal with Left leaders, may be just buying time. The government on Thursday, 30 August 2007, put on hold the operationalisation of the nuclear deal pending the findings of a committee constituted to go into the objections raised by the Left parties.

The committee would look into certain aspects of the agreement, the implications of Hyde Act on the 123 agreement and self-reliance in the nuclear sector, the implications of the nuclear agreement on foreign policy and security cooperation. The decision to set up a committee comes ahead of the debate on the nuclear issue in Parliament expected some time next week.

The Left Front's opposition to the nuclear deal with US had stoked concerns over the past few days that if the Communist allies of the ruling coalition government at the Centre decide to pull their support, the government will be reduced to a minority, triggering fresh elections.

Early next week, Asian markets react to comments from Fed Chairman Ben Bernanke on Friday, 31 August 2007. Bernanke speaks on housing and monetary policy. His comments will hold key coming at a time when global markets are hoping of cut in key interest rate in US Federal Reserve’s 18 September 2007 meeting. US markets will be closed on Monday, 3 September 2007, for the Labor Day holiday.

Asian markets have staged a solid rebound on expectations of a Fed cut after the Fed slashed a key bank lending rate on 17 August 2007 and as central banks around the world injected cash into banking systems to tackle a global credit squeeze triggered by the crisis in the US subprime mortgage market.

FIIs bought shares in 5 out 8 trading sessions from 20 August 2007 to 29 August 2007. They were net buyers of shares worth Rs 1535.10 crore in those 8 trading sessions, when the Indian market had bounced back from a steep fall.

Mutual funds, which are sitting on cash partly due to collections from new fund offers of past few months, deployed some of the cash into the market. Mutual funds were net buyers of shares to the tune of Rs 2012.50 crore in 9 trading sessions from 20 August 2007 to 30 August 2007.

A market-wide rollover of 82% of futures positions was witnessed from August 2007 derivatives contracts to September 2007 derivatives contracts. A 68% rollover was witnessed in Nifty futures. August 2007 F&O contracts expired on Thursday, 30 August 2007.