Marked may decline sharply on weak global cues

The market is likely to decline sharply after exit polls indicated that there could be a weak coalition government at the Centre. A setback in global equities led by US stocks will also weigh on Indian stocks which have run up sharply in the past two months.

Volatility may remain high in the near futures ahead of the formation of the next government at the Centre. The counting of votes will take place on Saturday, 16 May 2009. A party/alliance needs 272 seats in the 543-member parliament to claim power at the Centre.

The exit polls commissioned by various news channels to get a sense of the shape of the next government at the centre predicted a badly fractured mandate, with the Congress-led UPA shown holding a slight edge over the BJP-led NDA. Neither the UPA nor NDA were shown anywhere close to the halfway mark, making it clear that they'll have to do business with parties bracketed with the Third Front and the Fourth Front.

Fears of a fractured mandate in the parliamentary election pulled the market lower in what was a highly volatile trading session on Wednesday 13 May 2009. The BSE 30-share Sensex lost 138.38 points or 1.14% to 12,019.65 on that day.

Indian market has risen sharply in the past two months on hopes the worst of the global economic recession may be over. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex jumped 3,997.63 points or 48.98% to 12,158.03 on Tuesday, 12 May 2009, its highest closing in more than seven months.

Heavy buying by foreign funds has bolstered sentiment on the stock markets. Foreign funds are aggressively buying Indian stocks. As per the provisional figures on NSE, foreign funds bought shares worth Rs 4,106.96 crore on Wednesday, 13 May 2009. FII inflow in May 2009 totaled Rs 5530.90 crore (till 12 May 2009). The inflow in calendar year 2009 totaled Rs 5887.50 crore.

Asian stocks fell today as an unexpected drop in US retail sales and a decline in commodity prices dimmed the earnings outlook for electronics and metals producers. Key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan, fell by between 1.03% to 3.14%.

US markets finished at their session lows on Wednesday, 13 May 2009 dragged down by financials. HSBC, Bank Of America and JP Morgan Chase were among the key losers. The Dow lost 184.22 points, or 2.2%, to 8,284.89. The S&P 500 index fell 24.43 points, or 2.7%, to 883.92, while the Nasdaq Composite index declined 51.73 points, or 3%, to 1,664.19.

US retail sales fell for the second straight month, down 0.4%, in April 2009 amid weak gasoline and electronics sales. In other data, business inventories declined 1% in March 2009, compared with a 1.4% drop in February 2009.

Closer home, the Central Statistical Organisation (CSO) will today, 14 May 2009, unveil inflation for the year through 2 May 2009. Annual rate of inflation as measured by the wholesale price index rose 0.7% in the through 25 April 2009 from previous week's annual rise of 0.57%