Global events will set the course

Investors will be keenly watching the news emanating from the US financial sector. The market sentiments remain fragile on sustained selling by foreign institutional investors. A deep financial crisis engulfed the global markets when 158-year-old investment banking giant Lehman Brothers filed for bankruptcy, Merrill Lynch was bought over by Bank of America in a distress sale and the world's largest insurer AIG had to seek government help to thwart an imminent collapse. Any further bad news abroad will impact domestic bourses.

Global stocks witnessed a fresh lease of life on Friday, 19 September 2008, after US Treasury Secretary Henry Paulson proposed to congressional lawmakers a proopsal that would create an entity to deal with the billions of dollars of bad debt still choking the financial system.

Foreign institutional investors (FIIs) sold shares worth Rs 6,995.70 crore in September 2008 (till 17 September 2008). FIIs sold shares worth Rs 35,509.50 crore in the calendar year 2008. Mutual funds bought shares worth Rs 1,031.20 crore in September 2008 (till 17 September 2008).

The market will also eye development on the Indo-US nuclear deal. Reports from Washington say the US Congress aims to vote on the deal before it adjourns in a week's time, ahead of the November presidential elections. The civil nuclear agreement between the US and India, if approved, is seen as a milestone in bilateral relations, and will give India access to western technology and cheap atomic energy.

Shares of state-run oil marketing firms will be under pressure on rebound in crude oil prices from recent lows. These firms face huge underrecoveries as they have to sell fuel at mandated prices set by the government. Crude oil for October 2008 was hovering at $97.88 a barrel on the New York Mercantile Exchange. It had fallen to as low as $90.51 earlier in the week, continuing an almost steady decline since hitting a record $147.27 on 11 July 2008.

Softening of inflation has raised hopes that Indian market may be in the last lap of the interest rate hike cycle. Inflation based on the wholesale price index rose 12.14% in 12 months to 6 September 2008, marginally above the previous week's annual rise of 12.10%, data released by the government on 18 September 2008, evening showed.

Meanwhile, India Inc’s top 20 taxpayers showed mixed signals, with almost 35% paying lower advance tax in September this year. 15 September 2008 was the last date for payment of the second installment of advance tax.