Market to take cue from global equities

Lack of any positive triggers and subdued foreign inflows suggest a choppy trade in the coming week. The forthcoming Union Budget 2008-09, to be presented at the fag end of February 2008, will be one event that market will look forward to in the near term.

Possibility of a recession in the US economy looming large and with no end to bad news regarding US sub-prime mortgage crisis, weak global market sentiments may weight on the domestic bourses. The global markets were unable to avert selling pressure after Europe's largest bank by assets, UBS AG reported record loss of about $14 billion on assets infected by sub-prime mortgages in the US.

The US Federal Reserve (Fed) cut interest rates for the second time in eight days on 30 January 2008 in an effort to stimulate the flagging US economy. The Fed cut the rate by 0.5%, bringing its key lending rate to just 3%. On Tuesday, 22 January 2008 the US Federal Reserve bank slashed rates by 0.75%.

However, contradicting the expectations of a rate cut, the Reserve Bank of India (RBI) kept all key rates unchanged at a meeting held on 29 January 2008. A 75-basis-point cut in the interest rates by the US Fed had renewed expectations that the RBI would follow suit by a rate cut. However, these expectations were not met due to continuing inflation concerns on the domestic front and an increasingly worsening international situation.

The 30-share BSE Sensex fell 119.08 points or 64% to 18242.58, in the week ended 1 February 2008. The S&P CNX Nifty lost 66.1 points or 1.22% to 5317.25, in the week.

The BSE Small-Cap index lost 348.58 points or 3.34% to 10072.32 in the week. The BSE Mid-Cap index fell 259.58 points or 0.04% to 7761.54 in the week.

Annual inflation, based on the wholesale price index (WPI), rose 3.93% in the week ended 19 January 2008 as against 3.83% in the week ended 12 January 2008.