Global cues weak, RBI’s monetary policy eyed

Key benchmark indices are set to extend losses for third straight day today, 29 July 2008 tracking negative global cues. However the crucial Reserve Bank of India (RBI)’s monetary policy review scheduled at noon today, 29 July 2008, will provide the irection to the market in second half.

Marketmen opine that RBI may further hike short-term interest rates or the repo rate as well as statutory deposit requirements or the cash reserve ratio (CRR). RBI had increased short-term lending rates for banks and CRR by 0.5% each on 24 June 2008 to control surging inflation.

In the near term, the market trend is likely to dictated by slew of events like expiry of futures & options contracts on Thursday, 31 July 2008. Besides, the progress of the monsoon and corporates quarterly numbers will also be keenly watched.

Volatility may remain high ahead of the expiry of futures & options contracts for July 2008 series on Thursday, 31 July 2008. As per reports, marketwide rollover of positions from July 2008 series to August 2008 series stood at 30%, while that of Nifty was 35%, as of Monday 28 July 2008.

US crude gained $1.47 to settle at $124.73 a barrel yesterday, 28 July 2008 after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program.

Foreign brokerage house Goldman Sachs reduced India's growth forecast for fiscal year 2010 to 7.2% from 8.2% earlier due to a weak investment outlook on account of rising interest rates. However, the growth forecast for FY09 remains unchanged at 7.8%.

Goldman Sachs also raised its inflation forecast for both FY09 and FY10. For FY09, the forecast has been raised to 11.5% from 10% earlier, while for FY10 it has been increased to 5.3% from 4.7% earlier.

Asian markets were trading lower today, 29 July 2008. China's Shanghai Composite fell 1.74% or 50.51 points at 2,852.50, Japan's Nikkei plunged 2.15% or 287.34 points at 13,066.44, Hong Kong's Hang Seng lost 2.57% or 582.88 points at 22,104.33, Taiwan's Taiwan Weighted declined 3.76% or 271.79 points at 6,961.83, Singapore's Straits Times was down 1.50% or 43.66 points at 2,866.70, South Korea's Seoul Composite slipped 3.19% or 50.94 points at 1,547.35.

US markets tumbled yesterday, 28 July 2008 led by financials after investment bank Merill Lynch said it will take a 5.7 billion dollar write-down in Q3. The International Monetary Fund's warned that worsening credit conditions may prolong the economic slowdown added to the bearish sentiment. The IMF stood by its April forecast for about $1 trillion in losses stemming from the US mortgage crisis.

The Dow Jones industrial average lost 239.61 points, or 2.11%, to 11,131.08. The Nasdaq composite index declined 46.31 points, or 2%, to 2,264.22. The S&P 500 index fell 23.39 points, or 1.86%, to 1,234.37.

Back home, the 30-share BSE Sensex gained 74.17 points or 0.52% higher at 14,349.11and the broader based S&P CNX Nifty rose 20.25 points or 0.47% at 4,332.10, yesterday, 28 July 2008. The barometer index BSE Sensex is down 5,937.88 points or 29.26% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 6,857.66 points or 32.33% away from its all-time high of 21,206.77 struck on 10 January 2008.

As per the provisional figures foreign institutional investors (FII)'s sold shares worth Rs 721.90 crore while domestic funds bought shares worth Rs 456.67 crore yesterday 28 July 2008.

Foreign institutional investors (FIIs) were net sellers of Rs 1939.47 crore in the futures & options segment on 28 July 2008. They were net sellers of index futures to the tune of Rs 1166.31 crore and bought index options worth Rs 81.46 crore. They were net sellers of stock futures to the tune of Rs 883.85 crore and purchased stock options worth Rs 29.22 crore.