Market headed for weak opening in reaction to RBI’s move

The market is geared for weak start today reacting to Reserve Bank of India's move (after market hours) yesterday, 24 June 2008, hiking key lending rate and banks' reserve requirements in an aggressive step to combat over 11% inflation, and signaled it would act again if needed. Global cues are not supportive either.

The central bank raised its key lending rate by 50 basis points to 8.5% with immediate effect, its highest since March 2002 and the second hike this month. It also increased its cash reserve ratio, the ratio of deposits banks must keep with it, to 8.75% from 8.25% in two 25-basis-point stages on 5 July 2008 and 19 July 2008.

In a crucial event on the political front, the UPA and Left will meet today, 25 June 2008, to discuss the Indo-US nuclear deal. However, it is difficult to say whether there will be a concrete outcome or not. The Left parties have already made it clear that they will vote against the government if it moves ahead with the deal. This could further worsen the already weak sentiment.

Volatility is expected to remain high in the near term as derivatives contracts for June series are set to expire on Thursday, 26 June 2008. As per reports, the marketwide rollover of positions from June 2008 series to July 2008 series stood at 43.10% while that of Nifty was 44.70%, as on Tuesday, 24 June 2008.

Asian markets were trading mixed today, 25 June 2008. China's Shanghai Composite gained 0.46% or 12.97 points at 2,815.99. Taiwan Weighted rose 0.54% or 41.79 points at 7,779.91. However, Japan's Nikkei plunged 1.48% or 204.59 points at 13,644.97, Singapore's Straits Times was down 0.20% or 5.80 points at 2,956.36 and South Korea's Seoul Composite fell 0.74% or 12.72 points at 1,698.12

US markets ended lower yesterday, 24 June 2008. The Dow Jones industrial average lost 34.93 points, or 0.29%, to 11,807.43. The Standard & Poor's 500 index fell 3.71 points, or 0.28%, to 1,314.29, and the Nasdaq composite index declined 17.46 points, or 0.73%, to 2,368.28.

Back home, equities extended losses for the fifth straight day yesterday, 24 June 2008. The 30-share BSE Sensex was down 186.74 points or 1.31% at 14,106.58 and the broader based S&P CNX Nifty slumped 75.30 points or 1.76% at 4,191.10, on that day.

Sensex has lost 1590.32 points or 10.13% in five trading sessions, from its close of 15,696.90 on 17 June 2008, due to political uncertainty, and on fears of further rise in interest rates by the Reserve Bank of India to combat inflation

The barometer index has shaved 6180.41 points or 30.46% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2008. It is down 7100.19 points or 33.48% from its all-time high of 21,206.77 struck on 10 January 2008.

As per provisional data, foreign funds yesterday, 24 June 2008, bought shares worth a net Rs 90.06 crore. Domestic funds bought shares worth a net Rs 475.94 crore.

Foreign institutional investors (FIIs) were net sellers of Rs 1086.16 crore in the futures & options segment yesterday, 24 June 2008. They were net sellers of index futures to the tune of Rs 714.67 crore and sold index options worth Rs 425.34 crore. They were net buyers of stock futures to the tune of Rs 60.86 crore and sold stock options worth Rs 7.01 crore.

Crude oil prices rose 26 cents to settle at $137.00 a barrel yesterday, 24 June 2008, on the New York Mercantile Exchange