Market to drift lower on weak Asian stocks

The market is likely to drift lower on weak Asian stocks with sentiment edgy due to renewed selling by foreign funds. There is no major Q3 results today, 20 January 2009.

Asian shares slumped on Tuesday, 20 January 2009, on concerns that increasing woes in the global financial sector will deepen the world's economic downturn, highlighting the difficulties confronting incoming US President Barack Obama. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore, Taiwan and China were down by between 1.36% to 3.48%.

The tumble came after Royal Bank of Scotland on Monday, 19 January 2009, unveiled the biggest loss in UK corporate history, and after Britain launched a second bank rescue plan that failed to restore confidence in the wobbly financial sector. Royal Bank of Scotland said on Monday it was on course to report a 2008 loss of up to 28 billion pounds ($40.45 billion), leading the UK government to increase its stake in the lender to nearly 70%.

Trading in US index futures indicated that the Dow could fall 110 points at the opening bell on Tuesday. Obama will be inaugurated as US president later in the day, and his administration is expected to quickly roll out a hefty stimulus package and a revived plan to buy bad bank assets. US markets were closed on Monday for the Martin Luther King, Jr. Day holiday.

Closer home, foreign institutional investors (FIIs) are in selling mode after strong inflows at the begging of the month. Their outflow for the current month reached Rs 2216.30 crore till 16 January 2009.

As per the provisional data released by the stock exchanges, foreign funds sold shares worth a net Rs 363.37 crore on Monday, 19 January 2009. Domestic funds bought shares worth a net Rs 275.97 crore.

The early batch of Q3 earnings has been a mixed bag. While Infosys reported a strong-than-expected Q3 result, TCS warned that the market conditions are tough. Bajaj Auto's Q3 report card though weak was much better than market expectations. But net profit growth at cigarette major ITC was subdued in the third quarter.

Commodities have been another big loser since the second half of last year, though US crude futures were steady at $34.39 on Tuesday, 20 January 2009. Oil prices fell nearly $2 in electronic trade on Monday after Russia and Ukraine signed a gas deal to end a dispute and 22 days of fighting in the Gaza Strip was halted with separately declared ceasefires by Israel and the Islamist group Hamas.

The rupee weakened on Tuesday following weak Asian stock markets and the dollar's rise against some regional currencies. At 9:01 IST, the partially convertible rupee was at 48.90/91 per dollar, below Monday's close of 48.65