Market may move up

Market is expected to edge higher today backed by strong Asian markets. US stocks rebound late on Friday on positive news for the banking industry will further boost the sentiments.The market may see a pre-budget rally. The market may also see some upside from short covering ahead of the expiry of February 2008 derivatives contracts on Thursday, 28 February 2008.

The Union Budget 2008-09, to be presented by Finance Minister P Chidambaram on Friday, 29 February 2008, will be one event that market will look forward to in this week

Apart from the budget, another trigger for the market is prospects of further softening of interest rates by the US Federal Reserve.

Market is expecting a populist budget from the United progressive Alliance (UPA) government this year, considering that the parliamentary elections are due in 2009. Thus, the Finance Minister is likely to provider higher allocations to several social initiatives like rural upliftment, employment, education, agricultural growth and public health.

If the budget is market friendly, the sentiments may turn positive in the immediate term at least. Expectations are that the corporate income tax rate may be cut or the 10% surcharge on corporate tax may be abolished. Another possibility is that of a cut in dividend distribution tax from 15% to 12.5%. Meanwhile, FM may raise the Securities Transaction Tax slightly.

Meanwhile, as per reports, railway minister Lalu Prasad in his Railway budget to be presented this week, is likely to reduce both passenger fares and freight rates, riding a strong revenue growth and reduced operational costs. Rail fares are likely to be cut by 3% to 5% while freight rates for petroleum, steel and iron ore may come down by 4% to 5% due to reclassification of goods.

Most of Asian markets were trading strong today, 25 February 2008. Japan's Nikkei (up 2.07% at 13,780.35), Taiwan's Taiwan Weighted index (up 2.1% at 8,278.67), Singapore's Straits Times index (up 0.47% at 3,062.84), South Korea's Seoul Composite index (up 1.17% at 1,706.17) edged higher. However, Hong Kong's Hang Seng (down 0.21% at 23,256.57) and China’s Shanghai Composite index (down 2.43% to 4,264.24) edged lower.

U.S. stocks rallied late on Friday on news that banks were near an agreement to bail out bond insurer Ambac Financial, a deal that could prevent further damage to the banking industry and credit markets. After trading in negative territory for most of the session, US stocks turned positive in the last half hour after reports of a bank rescue may come as soon as next week. The Dow Jones industrial average rose 96.72 points, or 0.79 %, to end at 12,381.02. The Standard & Poor's 500 Index gained 10.58 points, or 0.79 %, to 1,353.11. The Nasdaq Composite Indexadded 3.57 points, or 0.16 %, to 2,303.35.

As per provisional data, foreign institutional investors (FIIs) sold shares worth Rs 709.54 crore Friday, 22 February 2008. Domestic institutional investors (DIIs) were net buyers of shares worth Rs 105.49 crore on that day.

The 30-share BSE Sensex was down 385.61 points or 2.17% to 17,349.07 on Friday, 22 February 2008.

Inflation based on the wholesale price index (WPI) rose to 4.35% for the week ended 9 February 2008 from 4.07% in the previous week, data released by the government today showed.