Market headed for weak start

Local equities are set to extend losses for the third straight day today, 15 July 2008 amid weak global cues over concerns about the fallout from the credit crisis. Political uncertainty along with the continued redemption pressure from funds may continue to weigh on the sentiment in the near term.

The Manmohan Singh government suffered another setback on Monday, 15 July 2008, on reports that at least two important leaders it was counting on for support in the trust vote seemed to be backing off. The two leaders are the Telengana Rashtra Samiti (TRS) chief Chandrashekhar Rao, and the other is DMK’s Dayanidhi Maran. The government is holding a two-day special session of parliament on 21 July 2008 and 22 July 2008 to seek vote of confidence after it was reduced to minority following withdrawal of support by Left parties on 8 July 2008. The government hopes to retain power due to backing from Samajwadi Party, a regional party in Uttar Pradesh.

India-dedicated funds saw $944 million outflows in the month to 9 July 2008, the highest redemption faced by any country-specific funds group in the period, according to EPFR Global data. Redemptions have continued for five weeks in a row leading the Indian benchmark indices to their lowest levels in 15 months. In the week ended 9 July 2008, India-dedicated funds saw an outflow of $215 million, again the highest by any country fund category. A fall in local currency erodes foreign investors earnings, if any, and accentuates losses. The Indian rupee has depreciated over 10% since the first week of May 2008.

Indian markets also reportedly bore the brunt of redemptions from Asia regional funds, which have considerable allocations to Indian markets.

August crude settled up 10 cents at $145.18 a barrel yesterday, 15 July 2008 on the New York Mercantile Exchange.

Asian markets were trading lower today, 15 July 2008, as the worsening situation of credit markets took a toll on financial shares. China's Composite dropped 0.52% or 14.89 points at 2,863.36, Japan's Nikkei plunged 1.48% or 193.20 points at 12,816.96, Hong Kong's Hang Seng declined 2.58% or 567.57 points at 21,446.89, Taiwan Weighted slipped 3.34% or 238.78 points at 6,918.18, Singapore's Straits Times was down 1.54% or 44.58 points at 2,859.54 and South Korea's Seoul Composite fell 2.38% or 37.17 points at 1,521.45

US stocks tripped yesterday, 14 July 2008, as concerns on the health of the US banking sector mounted after the collapse of IndyMac eclipsed the earlier optimism over the government's plan to stabilise mortgage lenders Fannie Mae and Freddie Mac. The Dow Jones industrial average slipped 45.35 points, or 0.41%, to 11,055.19. The Standard & Poor's 500 index declined 11.19 points, or 0.90%, to 1,228.30, and the Nasdaq Composite index lost 26.21 points, or 1.17%, to 2,212.87.

Back home, stocks ended volatile session with losses for the second straight day yesterday, 15 July 2008, on sustained selling in IT and select blue-chip stocks. The 30-share BSE Sensex was down 139.34 points or 1.03% at 13,330.51 and the S&P CNX Nifty fell 9.03 points or 0.23% to 4039.70, on that day.

The BSE Sensex is down 6956.48 points or 34.29% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 7876.26 points or 37.14% away from its all-time high of 21,206.77 struck on 10 January 2008.

As per provisional data, foreign funds sold shares worth a net Rs 436.52 crore while domestic funds bought shares worth a net Rs 63.25 crore yesterday, 14 July 2008.

Foreign institutional investors (FIIs) were net sellers of Rs 605.98 crore in the futures & options segment on 15 July 2008. They were net sellers of index futures to the tune of Rs 103.13 crore and sold index options worth Rs 178.69 crore. They were net sellers of stock futures to the tune of Rs 327.61 crore and purchased stock options worth Rs 3.46 crore.

Meanwhile, the Centre’s excise duty collections grew 2.8% to Rs 25,882 crore in Q1 June 2008 over in Q1 June 2007. For 2008-09, the Centre has pegged the excise duty budget estimate at Rs 1,37,874 crore, which represented an increase of 5.9% over the budget estimate of Rs 1,30,220 crore for 2007-08.