Markets may bounce back

Key benchmark indices are likely to open higher mirroring positive global cues. However the recent selling by foreign institutional investors (FIIs) may prove to be a dampener. Volatility may be high as stock and sector specific activity may rule the roost.

Asian stocks were trading higher today, 3 February 2009 led by banking and technology stocks. China's Shanghai Composite was up 0.46% or 9.33 points at 2,021.01, Hong Kong's Hang Seng rose 0.74% or 94.67 points at 12,956.16, Japan's Nikkei was up 0.10% or 7.62 points at 7,881.60, Singapore's Straits Times gained 1.11% or 18.85 points at 1,724.14, South Korea's Seoul Composite advanced 0.83% or 9.56 points at 1,156.51 and Taiwan's Taiwan Weighted jumped 1.75% or 74.65 points at 4,334.63.

However US markets ended on a mixed note on Monday, 2 February 2009. A rally in technology stocks lifted the Nasdaq Composite Index by 18.01 points, or 1.22%, to 1,494.43 on bets Obama administration's economic stimulus will boost spending on telecommunications and tech infrastructure. However, the Dow and S&P 500 fell as uncertainty about a plan to stem bank losses dragged. The Dow Jones industrial average ended down 64.11 points, or 0.80%, at 7,936.75 and the Standard & Poor's 500 Index dipped 0.45 point, or 0.05%, to 825.43.

Meanwhile, a new version of US President Barack Obama's economic stimulus plan intends to inject $888 billion into the recession-crippled US economy, with most of the money devoted to infrastructure spending. The Senate debated about this on Monday, 2 February 2009 after a previous version of the American Recovery and Reinvestment Act of 2009 was approved by the House or Representatives last week.

In economic data, the Institute for Supply Management reported contraction in manufacturing activity for the 12th straight month. However the reading of 35.6 came in better than expected. Construction spending fell 1.4% in December 2008 while consumer spending fell 1%.

World oil prices rose in Asian trade today, 3 February 2009 in a cautious market still confronted by weak global demand. New York's main futures contract, light sweet crude for March 2009 delivery, gained 27 cents to 40.35 dollars a barrel.

Back home, wide-based selling in stocks and sectors across the board took their toll on bourses, sending key benchmark indices lower on Monday, 2 February 2009. The BSE 30-share Sensex lost 357.54 points, or 3.79%, to 9,066.70 and the S&P CNX Nifty fell 108.15 points, or 3.76%, to 2,766.65.

Foreign institutional investors (FIIs) are in selling mode after an inflow of Rs 1319.10 crore in December 2008. Their outflow in January 2009 totaled Rs 4250.30 crore (till 30 January 2009).

According to provisional data on NSE, FIIs were net sellers worth Rs 125.68 crore while mutual funds sold shares worth Rs 161.38 crore on Monday, 2 February 2009.