Market may remain range bound ahead of Fed meet

The market is expected to stay cautious ahead of US Federal Reserve’s meeting later in the day to consider interest rates. Analysts speculate that Fed would cut rates by 25 basis points on Wednesday, 31 October 2007. High volatility on the bourses cannot be ruled out. Cues from global markets were negative.

The Reserve Bank of India (RBI) in its mid-term review of the annual monetary policy yesterday, 30 October 2007, hiked cash reserve ratio (CRR) by a steep 50 basis points to 7.5%. CRR is the proportion of cash that the banks have to keep with RBI. The central bank left the reverse repo rate, the rate at which it absorbs excess cash from banks, unchanged at 6%. The bank rate, too, was unchanged at 6%%. The CRR hike which come into effect from 10 November 2007, will suck out Rs 16,000 crore from the banking system.

The bad news for the industry and the consumer is contrary to some expectations, interest rates are unlikely to soften in the near term.

Asian markets were trading lower today, 31 October 2007. Japan's Nikkei (down 0.13% at 16,629.85), Hang Seng (down 0.92% at 31,347.03), Taiwan's Taiwan Weighted (down 0.88% at 9,672.25), Singapore's Straits Times (down 0.25% at 3,788.99) and South Korea's Seoul Composite (down 0.26% at 2,047), edged lower.

US stocks ended lower yesterday, 30 October 2007, as investors turned cautious ahead of the Fed meet. The Dow Jones Industrial Average slipped 77.63 points or 0.56% to 13,792.63. The tech-laden Nasdaq Composite declined marginally by 0.73 points or 0.03% to 2816.71, while the broad-market Standard & Poor's 500 shed 9.96 points or 0.65% to 1531.02.

As per provisional data, FIIs sold shares worth a net Rs 389.12 crore, while domestic institutional investors (DIIs) were net sellers of shares worth Rs 177.24 crore on Tuesday, 30 October 2007.

Crude oil fell below $90 in Asian trade today, 31 October 2007 as investors took profit on expectations of an increase in US crude stocks. New York's main contract, light sweet crude for December delivery, was 56 cents lower at $89.82 a barrel. Brent North Sea crude for December delivery dropped 46 cents to $86.98.

The 30-shares BSE Sensex declined 194.16 points or 0.97% to 19,783.51, on Tuesday 30 October 2007. It hit an all-time high of 20,238.16 in intra-day trade on that day. The broader based S&P CNX Nifty lost 37.15 points or 0.63% to 5,868.75, on Tuesday 30 October 2007. It hit an all time high of 5,976 on that day.

Q2 September 2007 results announced so far have been decent to strong.