Market may extend fall on weak global cues

The market may extend Tuesday (12 August 2008)’s fall on weak global cues. US stocks fell on Tuesday, 12 August 2008, as bank shares tumbled on fresh worries about the economy and further losses stemming from the mortgage crisis. The Dow Jones industrial average fell 139.88 points, or 1.19%, to 11,642.47, while the Standard & Poor's 500 Index slid 15.73 points, or 1.21%, to 1,289.59. The Nasdaq Composite Index dropped 9.34 points, or 0.38%, to 2,430.61.

In Asia on Wednesday, 13 August 2008, key benchmark indices in Hong Kong, Japan, South Korea, Singapore, China and Taiwan were down by between 0.8% to 2.5%.

Oil extended its sharp decline witnessed over the past few days. US crude oil for September delivery fell $1.44 to settle at $113.01 a barrel on Tuesday, 12 August 2008, on the New York Mercantile Exchange on concerns about a slowing economy and a drop in demand.

A sharp fall in oil prices from last month’s record high above $147 a barrel has raised hopes for cooling inflation and easing of upward pressure on interest rates. From a low of 12,575.80 on 16 July 2008, the barometer index BSE Sensex rose 2,636.33 points or 20.96% to 15,212.13 on 12 August 2008, led by a sharp fall in oil price.

Profit taking pulled the barometer index down 291.79 points or 1.88% to 15,212.13 on Tuesday, 12 August 2008. As per provisional data released by the stock exchanges, foreign funds on Tuesday, 12 August 2008, sold shares worth a net Rs 687.19 crore. Domestic funds sold shares worth a net Rs 7.65 crore.

India's industrial output rose 5.4% in June 2008 from a year earlier, above the previous month's upwardly revised 4.1%, data released by the government on Tuesday, 12 August 2008, showed. The growth was much lower than double-digit growth seen in 2006 and early 2007.

The board of market regulator Securities & Exchange Board of India will review the regulatory framework governing participatory notes (PNs), at its meeting on Wednesday, 12 August 2008. There are expectations that Sebi may relax some of restrictions on PNs that were introduced in October 2007. At the time, Sebi had proposed that foreign institutional investors (FIIs) and their sub-accounts cannot issue or renew PNs with underlying as derivatives with immediate effect. They had to unwind their current position within 18 months. The capital market regulator had also said that FIIs cannot hold over 40% of assets in PNs

The October 2007 restrictions on PNs were brought in the backdrop of copious capital flows into the country. Ever since the curbs on PNs were announced, the FIIs had been net sellers, initially due to these restrictions and later beginning January 2008 on account of global financial turmoil following deepening of US sub-prime crisis. Participatory notes are the instruments through which unregistered foreign players invest in Indian securities.

Meanwhile, the National Stock Exchange (NSE), late on Tuesday, 12 August 2008, said it has added 39 additional stocks for trading in the futures & options (F&O) segment effective from 21 August 2008. Some of the new F&O entrants include ABG Shipyard, Asian Paints, Balaji Telefilms, Container Corporation of India, Deccan Chronicle Holdings, Dish TV India, Indiabulls Real Estate, Sintex Industries, Thermax and Walchandnagar Industries