Market to track global equities

The market might be closely watching the cues from the global markets as fears of more credit-related losses in the global financial sector resurfaced. An expected cut in interest rate by US Federal Reserve at its meeting on 18 March 2008 may provide some support to the markets.

Fed Chairman Ben Bernanke signaled a readiness to cut interest rates again to prevent further damage to the weak US economy, even as he took note of rising inflation risks. Delivering the Fed's semiannual report on the economy to Congress, Bernanke made clear the central bank was worried a deepening housing slump, softening jobs market and tighter credit could dim an already bleak economic outlook.

India's central bank sees the government's 2008/09 budget presented on 29 February 2008 as being in line with growth and price stability objectives, adding it will help to implement a farm debt relief scheme. Governor Yaga Venugopal Reddy will work closely with the government and banks to ensure the farm loan waiver scheme helps farmers, improves credit flow and serves the interests of the banking system, the central bank said in a statement after its board meeting. The budget, announced last Friday, included duty cuts and a hike in the income tax threshold to stimulate consumer demand as well as a $15 billion debt relief scheme for farmers.

With rising inflation Reserve Bank of India (RBI) may not consider to provide liquidity in the market at this point of time by slashing rates specially when markets are reeling under global pressure. India's wholesale price index rose 5.02 % in the 12 months to 23 February 2008, higher than the previous week's rise of 4.89 %, government data showed on Friday. The annual inflation rate was 6.20 % during the corresponding week of the previous year.

The Finance Minister P Chidambaram proposed hike in the short-term capital gains tax on sale of shares to 15% from 10% in Union Budget 2008-09 which he presented to the parliament on Friday, 29 February 2008. The finance minister said securities transaction tax (STT) paid by the taxpayer will be treated like any other deductible expenditure against business income. According to market men the move will affect the liquidity and volumes on stock markets in the short term.

Higher crude oil prices is also a matter of concern. Crude oil prices continued their surge on Thursday 6 March 2008 hitting a new record high of nearly $106 a barrel.

Foreign institutional investors (FIIs) were net buyers of shares worth Rs 1,733.30 crore in the month of February 2008. They were net sellers of shares worth Rs 12,702.90 crore in calendar 2008, till 4 March 2008. Mutual funds bought shares worth Rs 513.90 crore in the month of February 2008.