Market may recover

The market may recover after last two days’ steep fall tracking overnight recovery in US stocks and sharp fall in global crude oil prices. However, sustained selling by foreign funds, political uncertainty and expectation of a surge in inflation will cap upside.

The government will today release inflation data for the year through 7 June 2008. Market men expectation inflation to rise to about 10% in the year through 7 June 2008 as the data will capture effect of a rise in retail fuel prices announced by the Union government on 4 June 2008. Inflation based on the wholesale price index rose 8.75% in the 12 months to 31 May 2008, the highest reading in more than seven year.

The market’s concerns are that the Reserve Bank of India (RBI) may further tighten the monetary policy to rein in inflation

Foreign funds have pressed heavy sales of Indian stocks this month. As per provisional data, they sold shares worth a net Rs 598.36 crore yesterday, 19 June 2008. Their outflow totaled Rs Rs 7125.20 crore this month, till 18 June 2008.

Sensex lost 608.91 points or 3.87% to 15,087.99 on 19 June 2008 from 15,696.90 on 17 June 2008 due to weak global markets and due to political uncertainty. As per reports, CPM, a key left party, may be working on a plan to pull out support to the Congress-led UPA government at the Centre. Left parties have threatened to pull support to the government if it took further steps on the Indo-US nuclear deal. Left parties are opposing the agreement, saying it undermines India's independent foreign policy and nuclear weapons program.

US stocks rose Thursday, 19 June 2008, as a drop in oil prices fueled investor optimism about consumer spending, driving shares of transportation and retailers sharply higher. The Dow Jones Industrial Average gained 34.03 points or 0.28% to 12,063.09. The tech-laden Nasdaq Composite Index rose 32.35 points or 1.33% to 2,462.06.

US crude for July delivery settled down $4.75, or 3.48%, at $131.93 per barrel on the New York Mercantile Exchange on Thursday. It lost further to $131.71 today as China's surprise move to increase fuel prices sparked worries about a curb in demand from the world's second largest consumer.