Market may extend losses

Local equities are seen extending losses for the fourth straight day today, 5 June 2008 on worries of double digit inflation post fuel price hike announced yesterday, 4 June 2008. Sentiment may also nervous stay nervous following weak global cues.

Local markets have been reeling under pressure since the past three sessions marred by fears of spike in inflation to a 13-year high post fuel price hike announced yesterday, 4 June 2008. Weak global markets also played the spoilsport during this period. The 30-share BSE Sensex tumbled 447.77 points or 2.81% at 15,514.79 and the broader based S&P CNX Nifty was down 130.3 points or 2.76% at 4,585.60, yesterday 4 June 2008.

The BSE Sensex has now eroded 900.78 points or 5.48% from 16,415.57 in just three trading days. The Sensex has now slumped 5691.98 points or 26.84% from its all time high of 21,206.77, struck on 10 January 2008. However it is still up 705.3 points or 4.76% from its recent low of 14,809.49 touched on 17 March 2008.

In a crucial development, government yesterday, 4 June 2008 agreed to raise its petrol and diesel prices by about 10% in an attempt to curb mounting losses of state-owned refiners thereby stoking inflation and risking a political backlash. After 10 days of debate over the price increase, the Cabinet also agreed to cut the import duty on crude oil to support state run refining and retailing firms. Customs duty on crude was also reduced to nil from 5%. The duty cuts would amount to Rs 22,660 crore in revenue loss, the Revenue Secretary said.

Meanwhile, the ruling Left Front in West Bengal has called a 12-hour general strike today, 5 June 2008 in protest against the 'anti-people' decision of the Centre to raise the prices of petrol, diesel and cooking gas.

Analysts opine that higher inflationary expectations immediately gave rise to fears of a cash reserve ratio (CRR) or interest rate hike, which is a negative for markets.

In coming weeks, markemen would be eyeing two things. One would be progress of monsoon and second would be the advance tax figures.

Asian markets were trading lower today, 5 June 2008. Japan's Nikkei (down 0.69% at 14,335.79), Taiwan's Taiwan Weighted (down 1.13% at 8,530.12), Singapore's Straits Times (down 0.57% at 3,117), South Korea's Seoul Composite (down 0.72% at 1,820.59), Hong Kong's Hang Seng (down 0.03% to 24,110.27) and China's Shanghai Composite (down 0.06% at 3,368.48), edged lower.

US markets ended mixed in volatile session yesterday, 4 June 2008. Banks fell to their lowest level in eight years on Fed Chairman Ben Bernanke's warning that inflation is still a concern. Financials tumbled on rumors that Moody's May Put bond insurers AMBAC and MBIA on review for a possible credit rating downgrade.

The Dow Jones industrial average slipped 12.37 points, or 0.10%, to 12,390.48. The Standard & Poor's 500 index was down 0.45 points, or 0.03%, to 1,377.20, while the Nasdaq advanced 22.66 points, or 0.91%, to 2,503.14.

As per provisional data, foreign funds sold shares worth a net Rs 1198.80 crore yesterday, 4 June 2008. Domestic funds bought shares worth a net Rs 419.81 crore on that day.

Foreign institutional investors (FIIs) were net buyers of Rs 334.96 crore in the futures & options segment yesterday, 3 June 2008. They were net buyers of index futures to the tune of Rs 82.12 crore and bought index options worth Rs 26.18 crore. They were net buyers of stock futures to the tune of Rs 225.94 crore and bought stock options worth Rs 0.72 crore.