Weakness may persist

The specter of more margin calls after a recent sharp slide may weigh on the bourses. Sensex tanked 951.03 points or 6.03% at 14,809.49 on Monday, 17 March 2008, as the fire sale of ailing US bank Bear Stearns and the Federal Reserve's emergency cut in its discount rate intensified concerns that there could be more victims of the global credit crisis. It was the second biggest single day point loss in the barometer index. Margin calls are normally triggered when markets show hyper volatility or witness abnormal slides

As per market buzz, a portfolio management scheme run by one of the biggest operators is facing big redemptions. With this being a curtailed trading week, traders are unlikely to build large positions. The market remains closed on Thursday (20 March 2008) on account of Id-E-Milad and on Friday (21 March 2008) on account of Good Friday.

As per provisional data, FIIs sold shares worth a net Rs 658.22 crore on Monday, 17 March 2008. Local funds bought shares worth a net Rs 211.48 crore on that day. Foreign institutional investors (FIIs) were net sellers of Rs 435.32 crore in the futures & options segment on Monday. According to data released by the NSE, FIIs were net sellers of index futures to the tune of Rs 287.77 crore and bought index options worth Rs 69.60 crore. They were net sellers of stock futures to the tune of Rs 204.87 crore and sold stock options worth Rs 12.29 crore

The Dow industrials ended slightly higher, but the S&P 500 and the Nasdaq fell on Monday after JPMorgan Chase & Co's deal to buy struggling brokerage Bear Stearns at a rock bottom price failed to dispel fears of deeper fallout from the escalating credit crisis. Asian markets were mostly in the red today.

The US Federal Reserve is widely expected to slash its benchmark interest rate, currently at 3% at its policy meeting later in the day. Market expectations are that it may cut Fed Funds rate by 75 to 100 basis points.

A torrent of bad news has spooked bourses in the past few days with buyers deserting the market. Adding to the woes of domestic bourses already hit by tumbling global markets were earnings downgrade recently by brokerages of ICICI Bank, India’s biggest private sector bank in terms of net profit, and Larsen & Toubro, India’s biggest engineering and construction firm in terms of order book; lower-than-expected industrial production data for January 2008; and a surge in inflation.

The hike in short-term capital gains tax and alteration of tax treatment of the Securities Transaction Tax (STT) in Union Budget 2008-09 announced on 29 February 2008 has earlier dented sentiment. Buyers have stayed away from the bourses on continued uncertainty about the extent and duration of the credit crisis caused by the defaults in the US sub-prime mortgage market.