Global cues, foreign fund flows to dictate trend

Volatility may surge in the forthcoming week ahead of the outcome of the month long parliamentary elections on 16 May 2009. Till the election results, the domestic bourses will take cues from global markets

Markets across the globe have rebounded sharply from March 2009 lows on signs of improving global economy. A government report on 30 April 2009 showed Japan's industrial production rose in March 2009 for the first time in six months and at twice the pace estimated by economists. The CLSA China Purchasing Managers' Index rose in April 2009, the first gain in nine months, CLSA Asia Pacific Markets said 4 May 2009.

US government on 4 May 2009 reported that construction spending in the country rose for the first time in six months in March 2009 as stimulus spending kicked in, while pending sales of existing homes rose 3.2% for the month.

The US government's much awaited stress test conducted on Thursday, 7 May 2009 on the health of 19 major banks showed better than expected results with nearly all appeared to have weathered a winter of economic turmoil. The US Federal Reserve said that after taking account of losses, revenue and reserve requirements the banks needed to increase capital levels by $75 billion.

Back home, political uncertainty is likely to trigger high volatility on the bourses in the coming week. The counting of votes will take place on 16 May 2009. Opinion polls carried out before voting began predicted neither the Congres led United Progressive Alliance (UPA) nor the main opposition bloc led by the Bharatiya Janata Party (BJP) would win a clear mandate, leaving both to find new allies in order to form a government.

State Bank of India, India's biggest bank in terms of branch network unveils Q4 March 2009 results on Saturday, 9 May 2009. Results next week included Hindustan Unilever, Tata Teleservices (Maharashtra), Kotak Mahindra Bank, Chambal Fertilizers & Chemicals and State Trading Corporation of India.

Earnings unveiled by Indian companies so far have been better than expectations.

Firm global cues and buying support from foreign institutional investors triggered a solid 3716.03 points or 45.53% surge in the BSE 30-share Sensex to 11,876.43 on 8 May 2009 from a 3-year closing low of 8,160.40 on 9 March 2009. It has gained 2229.12 points or 23.10% in the calendar year 2009.

Foreign institutional investors (FIIs) have been the key drivers of the recent rally. Their inflow in May 2009 totaled Rs 3,269.60 crore (till 7 May 2009) and Rs 3,982.40 crore in calendar year 2009. Earlier, FIIs had resorted to heavy selling of Indian stocks in the first two months of calendar 2009.