Pre Session Commentary - June 12 2008

The Indian Market is expected to have negative opening on the back of weak global cues as the US market closed in red while the Asian markets are going through negative sentiment. On Wednesday, the Indian market closed upbeat after recovering its three days loss due to heavy buying pressure in key indices. The market opened with the positive energy tracking the mixed global cues and extended the gain on the positive opening of European markets. It was hovering in positive territory throughout the trading session. The FMCG stock was not in favour on account of heavy selling force, while all other stocks closed in green and most of the buying was seen in capital goods, reality, banking and metal stocks. The BSE Sensex closed higher by 296.07 points at 15,185.32 and NSE Nifty ended up by 73.80 points to close at 4,423.60.

We expect that the market may remain cautious during the trading session due to surge in global crude oil price and hike in repo rate by RBI to tame inflation may also put some pressure. The Index of Industrial Production numbers for April 2008, due out today, will provide further evidence on the state of the economy and the market may also be keeping a watch on this to take further direction.

The Reserve Bank of India on Wednesday surprisingly raised repo rate by 25 basis points to 8% to curb inflation, and according to analysts more tightening is expected if inflation continued to head towards double digits. This hike is a signal of rise in interest rates, and corporates who were preparing to issue bonds to raise funds may hesitate to launch such offerings.

Ranbaxy is bringing in Daiichi Sankyo as Majority Partner. Daiichi will acquire 5% to 62% for $3.4 bn to $4.6 bn. Family of Malvinder Singh, the CEO of Ranbaxy Laboratories was selling its entire 34.8% stake in the company to Japan’s Daiichi Sankyo for Rs10,000 crore ($2.4 bn) at Rs737 per share.

On Wednesday, the US market closed in negative territory as the price of oil rose, financial shares plunged and the Federal Reserve notified that the economy has remained sluggish since more than two months. Crude oil surged more than $5 to $136.38 per barrel due to a US government report that showed stocks dropped more than expected on the week.

The Dow Jones Industrial Average (DJIA) closed lower by 205.99 points at 12,083.77 along with NASDAQ fell by 54.93 points to close at 2,394.01 and S&P 500 dropped by 22.95 points to close at 1,335.99.

Indian ADRS ended down. In technology sector, Patni Computers fell by 5.50% along with Wipro by 3.28%, Satyam by 2.99% and Infosys by 1.84%. In banking sector, ICICI bank and HDFC bank decreased by (4.51%) and (3.77%) respectively. In telecommunication sector, Tata Communication and MTNL dropped by (4.07%) and (1.12%). Sterlite industries declined by (3.23%).

Today the major stock markets in Asia are trading in red on concern of slow growth and faster inflation. Hang Seng index is trading lower by 491.26 points at 22,836.34 along with Japan’s Nikkei trading down by 321.78 points at 13,861.70 and Taiwan Weighted trading at 8,165.28 down by 180.31 points.

The FIIs Wednesday stood as net seller in equity. The gross equity purchased was Rs3,311.50 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs4,155.50 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs844.00) Crore and net debt was Rs0.00 Crore.

Today, Nifty has support at 4,226 and resistance at 4,453 and BSE Sensex has support at 14,563 and resistance at 15,262.