Market to stay cautious ahead of oil price decision

Local equities are likely to stay cautious ahead of the crucial decision on oil price later in the day today. As per reports, the government is likely to announce a hike in fuel prices to bail out state-owned oil marketing companies (OMCs) that are suffering massive financial losses due to skyrocketing international crude prices.

The decision will be first taken at a meeting of the Cabinet Committee on Political Affairs (CCPA) scheduled for the morning and later ratified by the Cabinet.

However, the government has been in a fix on the oil price issue and has failed to take any decision on fears of opposition from the public as well as the Left parties which are offering outside support. The Left parties have warned of a nationwide protest against any move to raise the prices of fuel. They have instead argued in favour of restructuring the tax on petrol and diesel.

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 mixed today, 4 June 2008. Nikkei 225 index (up 1.23% at 14,384.40), Taiwan's Taiwan Weighted (up 0.45% at 8,618.24), Singapore's Straits Times (up 0.12% at 3,157.65), South Korea's Seoul Composite (up 0.51% at 1,828.66), edged higher.

However, China's Shanghai Composite (down 1.14% at 3,397.33) and Hang Seng (down 0.11% at 24,349.36) slipped.

US markets declined in volatile session yesterday, 3 June 2008 led by growing speculation that Lehman Brothers will be forced to raise more capital and a drop in oil prices pushed down energy companies. The Dow Jones industrial average declined 100.97 points, or 0.81%, to 12,402.85. The S&P 500 index slipped 8.02 points, or 0.58%, to 1,377.65, while the Nasdaq Composite index was down 11.05 points, or 0.44%, to 2,480.48.

Back home, the market staged a smart intra-day rebound in second half of the day’s trading session yesterday, 3 June 2008, led by recovery in Reliance Industries (RIL). Panic selling in early trade by wary investors kept market depressed in the first half. The 30-share BSE Sensex settled 100.62 points or 0.63% lower at 15,962.56 and the broader based S&P CNX Nifty fell 23.70 points or 0.5% at 4,715.90, on that day.

As per provisional data, foreign funds sold shares worth a net Rs 1020.70 crore yesterday, 3 June 2008. Domestic funds bought shares worth a net Rs 262.49 crore on that day.

Foreign institutional investors (FIIs) were net sellers of Rs 858.65 crore in the futures & options segment yesterday, 3 June 2008. They were net sellers of index futures to the tune of Rs 1394.78 crore and bought index options worth Rs 548.79 crore. They were net sellers of stock futures to the tune of Rs 96.59 crore and bought stock options worth Rs 83.93 crore.

Meanwhile, mutual funds have reportedly managed to increase their assets under management (AUM) by 5.36% in May 2008, helped by fresh investments in fixed income funds. The collective AUM rose by 30,576.72 crore in May 2008, according to the data released by the Associations of Mutual Fund in India (AMFI).