Market to track global equities

Indian markets will track global indices as US recession worries continue to haunt global markets. The Union Budget 2008-09 that would be presented by the finance ministry at the fag end of the month will be the next major trigger for the market.

Investors will closely watch global markets after the Federal Reserve Chairman Ben Bernanke alluded to the possibility of US nearing a recession, indicating the Fed may continue to ease interest rates further. Bernanke and Treasury Secretary Paulson continued to forecast slow growth. US Financial stocks had come under pressure after Swiss banking giant UBS reported a loss of $11.12 billion in Q4 December 2007.

However, Indian Prime Minister Manmohan Singh said on Friday 15 February 2008, at an industry conference that the government was confident of sustaining 9% annual economic growth despite a possible global slowdown.

Q3 December 2007 results of Indian incorporation did meet market expectations with decent performance amidst fear of slowdown of the world economy.

The forthcoming Union Budget 2008-09 is unlikely to offer any significant reduction in tax rates, though it may provide for larger subsidies and public spending on infrastructure. This was the finding of a survey of 300 business heads by the Associated Chambers of Commerce and Industry (Assocham). Most of the CEOs surveyed were of the opinion that the budget could have more benefits for the common man than to industry.

Foreign institutional investors (FIIs) continue to press sales in Indian equity market. They were net sellers of Rs 279.80 crore in this month till 13 February 2008. They were net sellers of Rs 13,315.40 crore so far in calendar 2008.

Reportedly, India's decision to raise retail fuel prices has poured cold water on any expectations of a cut in interest rates before the next central bank review on 29 April 2008, as inflation was already showing signs of picking up. The government raised state-set petrol and diesel prices by 4.6% and 3.3% respectively on Thursday 14 February 2008 to bring them closer to global benchmarks and ease losses at state-run oil retailers. The move had been long debated by policy makers and comes just over two weeks after the central bank left its key lending rate steady at 7.75 %, warning that inflation risks persisted.

As per another reports, the government has now turned its attention to keeping inflation in check. Till a few days ago, the government had been asking the Reserve Bank to cut interest rates to keep the growth momentum going. However, it wants to play safe now and continue with the policy of sucking excess money out of the economy, which will help ease the price pressure.

Annual inflation, based on the wholesale price index, stood at 4.07% in the week ended 2 February 2008 compared with 4.11% in the week ended 26 January 2008. The market estimate stood at 4.16%. Inflation figure for the week ended 8 December 2008 was revised upwards to 3.84% as against 3.65% reported earlier.