Market may remain subdued

Inflation-battered stock markets are unlikely to see any steady upsurge this week, considering the soaring global oil prices, unrelenting inflationary pressure and indications of RBI tightening the monetary policy further, analysts have said.

Investors should tread a cautious path since the week would begin with negative sentiments primarily owing to the repercussions of higher fuel price, analysts have said.

Last week's fuel price hike is expected to have a cascading effect on all commodities, products and services and is likely to stoke inflation to higher levels, they added.

The government on last Wednesday raised petrol price by Rs 5 a litre and that of diesel by Rs 3 a litre in an attempt to offset the mounting losses of state-owned refiners due to higher global crude prices.

Inflationary pressure is expected to continue, at least in the near term, they said. Inflation surged to 8.24 per cent for the week ended May 24 from 8.1 per cent in the previous week, despite a fall in prices of some essential commodities, fruits, vegetables spices.

Wholesale prices-based inflation stood at 5.15 per cent a year ago. The rate of price rise is expected to advance further after two weeks, when the June 5 increase in prices of petrol, diesel and cooking gas would be taken into account.

Hinting at a possible increase in cash reserve ratio (CRR)-- the amount banks are mandated to keep with the central bank-- or short-term rates, Reserve Bank of India Governor Y V Reddy last Thursday said the central bank would take all measures to curb inflation.

The next policy review meeting of RBI is on July 29.

The markets, after a hike fuel prices last week, declined by about 10 per cent. The benchmark Sensex on BSE dropped 843.39 points, or 5.14 per cent, to 15,572.18, while the S&P CNX Nifty fell 242.3 points, or 4.97 per cent, to 4,627.80 during the week ended June 6.

Foreign institutional investors' (FIIs) contribution in buying equities remained negative in the year 2008 (till June 6) as they made gross purchases of shares worth Rs 3,86,594 crore and sold the same valued at Rs 4,05,254.60 crore, indicating a deficit of Rs 18,660.60 crore.

However, mutual funds' record in purchasing equities was a bit better in June as they made gross purchases of shares (till June 4) worth Rs 1,932.30 crore and sold the same valued at Rs 1,788.10 crore, reflecting a net investment of mere Rs 144.20 crore.