Eyes set on Fed meet

Caution is the eldest child of wisdom. - Victor Hugo.

The opening is likely to be cautious given the soft Asian markets. Stocks in the US managed modest gains while those in Europe did exceedingly well. A few key earnings are due today but the same may not have a market-wide impact.



The Nifty is most likely to surpass 5500 soon and could even head higher after that, but there is bound to be some pressure at higher levels. Largely the risks exist on the external front. But locally too we are facing high inflation and rising interest rates that tend to have a cascading effect on both, households as well as corporates.

Valuations don’t appear to be as compelling as they seemed a few months back, especially in the case of Large Caps. Q1 results have missed expectations at an aggregate level and therefore meaningful upgrades may take a while to materialise. But, Small-Cap and Mid-Cap counters have been abuzz lately and may remain in the spotlight.

PSU stocks, particularly those with lower public shareholding, will be in action after the Government said that listed state-run companies need not dilute equity to meet the 25% public float rule. Those with less than 10% public holding need to reach that threshold in three years while those listing through public issues can comply with the new 10% norm in one go. Private companies also can breath easy as the annual minimum 5% increase mandated earlier has been scrapped. They will have to get to 25% public holding level in three years.

Coming to the global economy, euro-zone seems to have weathered the sovereign debt storm well but concerns are mounting over the state of the US economy. Naturally all eyes are on today’s FOMC meet. Speculation is rife that Bernanke & Co. may unleash another round of quantitative easing. Whether Fed policymakers oblige the markets or not only time will tell. Though the markets may welcome such a move, it will only confirm that the US has hit a soft patch. And, that will not be good news.

We will also get an update on the Chinese economy later this week when a slew of economic reports are issued. Q2 GDP data on euro-zone is also due this week. Back home, the latest IIP data will be out on Thursday and monthly inflation figures on Monday.

Results Today: Amtek Auto, Den Networks, Educomp, Great Offshore, Hanung Toys, Hindustan Motors, IVRCL Infra, Jai Corp., Nagarjuna Construction, Piramal Healthcare, Prime Focus, RCF, Rolta and Tata Motors.

FIIs were net buyers of Rs5.22bn in the cash segment on Monday (provisionally), according to the NSE

web site. Local funds were net sellers of Rs455.1mn. In the F&O segment, they were net buyers at Rs6.74bn. Foreign funds were net buyers of Rs8.29bn in the cash segment on Friday, according to SEBI's web site.