Investors may adopt a cautious approach

The market may remain subdued to weak in the near term as sentiment remains edgy on concerns of a slowing domestic economy and weak global markets. Yet, stock-specific buying on expectations of rate cuts and industry specific export sops could restrict losses. Volatility is expected to remain high ahead of the expiry of February 2009 futures & options (F&O) contracts on Thursday, 26 February 2009. It is a truncated trading week as the market remains closed on Monday, 23 February 2009, on account of Mahashivratri.

Inflation based on the wholesale price index rose 3.92% in the year through 7 February 2009, much lower than previous week's annual rise of 4.39%. It was the index's lowest annual rise since 3.83% on 29 December 2007. Falling inflation has provided room for the Reserve Bank of India (RBI) to cut interest rates further to shield the domestic economy from the global financial sector crisis and recession in key global economies.

Meanwhile Commerce minister, Kamal Nath is likely to announce an export booster package later this month which would address some of the crucial concerns of the exporters. The sops under consideration include simplification of rules for service tax refund, extension of time given to exporters to meet export obligation and an increase in rates of input duty reimbursement schemes like drawback and duty entitlement pass book (DEPB) scheme for some sectors.

Stocks fell in the week ended Friday, 20 February 2009, after the acting Finance Minister Pranab Mukherjee in the interim general budget on 16 February 2009 did not offer anticipated tax sops and there was no sector-specific stimulus package to revive economic growth, causing disappointment among the investors.

Gloomy US unemployment data reinforced fears the world's largest economy is in a severe slump. US government data showed a record number of continuing unemployment claims, at nearly 5 million, and a surprisingly sharp drop in manufacturing in the mid-Atlantic states.

Meanwhile, foreign institutional investors (FIIs) outflow in 2009 totaled Rs 5,425.90 crore (till 19 February 2009). FIIs had pulled out a massive Rs 52,998.70 crore in calendar year 2008, as against an inflow of a huge Rs 71,486.50 crore in calendar year 2007.