Market may see firm opening

Key benchmark indices are likely extend yesterday’s gains tracking strong global markets and a sharp slide in crude oil for the third straight day yesterday, 17 July 2008. On the New York Mercantile Exchange, August crude settled down $5.31 at $129.29 a barrel yesterday, 17 July 2008.

The wholesale price index (WPI)-based annual rate of inflation rose to 11.91% in the week ended 5 July 2008, marginally higher than the 11.89% reported in the previous week. The annual inflation rate was 4.61% during the corresponding week last year. Inflation for the week ended 10 May 2008 was revised upwards to 8.57% from 7.82% reported earlier. The data was released after market hours yesterday, 17 July 2008.

Finance Ministry P Chidambaram yesterday, 17 July 2008 said that the inflation has stabilised. He added that more measures might be taken to tame prices even as the steps taken by the Reserve Bank of India (RBI) take effect. Inflation is hovering at a 13-year high and is well above the RBI’s tolerance level of 5.5% set for the current fiscal.

The RBI is scheduled to review monetary policy on 29 July 2008 and analysts opine that the Central bank may tighten monetary policy again. Last month, the RBI increased its key lending rate by 75 basis points and hiked the banks' reserve requirements by 50 basis points to combat inflation.

Among the blue-chip stocks, Wipro, Satyam Computer Services, Jaiprakash Associates and Cipla will declare their Q1 June 2008 results today.

Asian markets were trading higher today, 18 July 2008. Shanghai Composite surged 2.10% or 56.28 points at 2,741.05, Japan's Nikkei advanced 0.39% or 50.34 points at 12,938.29, Hong Kong's Hang Seng rose 0.80% or 174.70 points at 21,909.42, Taiwan's Taiwan Weighted gained 0.35% or 24.41 points at 6,998.92, Straits Times was up 0.33% or 9.51 points at 2,873.61, and South Korea's Seoul Composite added 0.38% or 5.74 points at 1,531.30

US stocks rallied overnight as oil prices dropped sharply, building on optimism spurred by several unexpectedly strong earnings reports, including JPMorgan Chase. The Dow Jones Industrial Average surged 207.38 points, or 1.85%, to 11,446.66. The Standard & Poor's 500 index rose 14.96 points, or 1.20%, to 1,260.32, and the Nasdaq Composite index gained 27.45 points, or 1.20%, to 2,312.30.

Back home, frenzied buying in battered pivotals along with short covering after four straight days of catastrophic fall triggered a solid rally on the bourses yesterday, 17 July 2008. The 30-share BSE Sensex surged 536.05 points or 4.26% at 13,111.85 and the broader based S&P CNX Nifty advanced 130.50 points or 3.42% at 3,947.20, on that day.

The BSE Sensex is down 7175.14 points or 35.36% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 8094.92 points or 38.17% away from its all-time high of 21,206.77 struck on 10 January 2008.

As per provisional data, foreign funds bought shares worth a net Rs 310.45 crore and domestic institutional investors bought shares worth a net Rs 168.02 crore yesterday, 17 July 2008.

Foreign institutional investors (FIIs) were net buyers of Rs 2598 crore in the futures & options segment on 17 July 2008. They were net buyers of index futures to the tune of Rs 2433.0 crore and bought index options worth Rs 218.85 crore. They were net sellers of stock futures to the tune of Rs 56.85 crore and purchased stock options worth Rs 2.96 crore.

Political uncertainty will continue to weight on the market in the near term. 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.

With the trust vote just five days away, it's not at all clear if the Congress has the support to survive. As per reports, 3 regional leaders with 10 Lok Sabha MPs among them hold the key to the survival of the UPA Government - H D Deve Gowda, Shibu Soren and Ajit Singh. The UPA has assured support of 261 MPs and the Opposition has 259. The halfway mark is 271 and to survive, the government needs at least 12 of the undecided ones.