Pre Session Commentary - June 25 2008

The Indian Market is expected to have negative opening on the back of weak global cues, political uncertainty and rates hike by RBI. Tuesday, the Indian market closed in red for the fifth straight trading day backed by selling across the ground. The BSE Sensex fall below the 14,000 mark for the first time since late August 2007. Though the market showed some buying interest from the investors at the initial session but later tumbled to give up all its gains. The market lost the momentum after the mid session to close on the back foot due to lack of support from the investors. From the sectoral front, metal, metal stock was major victim, which ended with a cut of more than 3.5 % with all indices closed in red. The BSE Sensex closed lower by 186.74 points at 14,106.58 and NSE Nifty ended down by 75.3 points at 4,191.10. The BSE Mid Cap and BSE Small Cap ended with a cut of more than 1.5% each. We expect that market may remain cautious during the trading session.

Investors will have eye on the crucial meeting of the members of UPA with left scheduled today to decide on the fate of proposed deal between the Congress party and the U.S. President. Left parties had threatened to withdraw support if the government went ahead with the deal.

RBI on Tuesday raised its key lending rate and the CRR by 50 basis points each to tame inflation that hit a 13-year high early in June. As a second increase this month in its repo rate, the RBI raised the key lending rate to 8.5% from 8.0% with immediate effect. RBI will raise the cash reserve ratio to 8.75% from 8.25% in two stages, to 8.5% from July 5 and to 8.75% from July 19. These hikes will have adverse implications for the manufacturing sector, which have impact of high interest rates.

US markets closed lower on Tuesday. The Federal Reserve Bank in the U.S. began a two-day policy meeting on Tuesday for decision on interest rate and is expected to hold key rate for short-term lending at current rate of 2%, at the end of policy meeting today.

The Dow Jones Industrial Average (DJIA) closed lower by 34.93 points at 11,807.43 along with NASDAQ down by 17.46 points to close at 2,368.28 and S&P 500 dropped by 3.71 points to close at 1,314.29.

Indian ADRs ended down. In technology sector, Satyam advanced marginally by (0.08%) while Infosys dropped by (2.40%) along with Wipro by (1.04%) and Patni Computers by (0.62%). In banking sector, ICICI bank and HDFC bank decreased by (3.83%) and (3.38%) respectively. In telecommunication sector, Tata Communication and MTNL reduced by (4.34%) and (0.65%). Sterlite industries declined (1.58%).

Today the major stock markets in Asia are trading mixed. Taiwan Weighted is trading higher by 41.79 points at 7,779.91 while Japan’s Nikkei is trading down by 204.59 points at 13,644.97. Hong Kong market is closed today on account of holiday.

The FIIs on Tuesday stood as net seller in equity and debt. The gross equity purchased was Rs2,273.90 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,894.70 Crore and gross debt sold stood at Rs132.70 Crore. Therefore, the net investment of equity reported was (Rs620.80) Crore and net debt was (Rs132.70) Crore.

Today, Nifty has support at 4,069 and resistance at 4,262 and BSE Sensex has support at 13,635 and resistance at 14,352.