FII buying may stem decline

Caution may prevail on the domestic bourses as investors may remain on the sidelines ahead of major local and global events later this week. Asian stocks gave up early gains on Tuesday on as nervous investors worried whether a global rally would run out of steam. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were down by between 0.04% to 0.46%. A spate of merger and acquisition activity and increasingly eye-popping takeover bids have helped propel many global indexes to record highs, supporting the view that the long bull market has further to run.

But Indian markets had retreated in the past two days in contrast to a firm trend in global markets, due to lack of follow up buying at higher level after a recent solid surge in share prices. Corporate results announced so far have been strong. The major Q4 results today are Dabur India and GAIL (India).

The seventh and final phase of polls in Uttar Pradesh is scheduled for on Tuesday (May 8) and counting of votes is due on 11 May 2007, with results expected on the same day. The UP vote is seen as a barometer of national political trends.

Foreign funds resumed buying after they had turned sellers in two trading sessions, on 27 April and 30 April. FIIs were net buyers to the tune of Rs 212 crore on Friday 4 May. Their inflow was Rs 56.20 crore on 3 May 2007. As per provisional data, FIIs were net buyers to the tune of Rs 74.57 crore on Monday 7 May. Domestic institutional investors were net buyers to the tune of Rs 143.58 crore on 7 May.

Economic news expected later in the week could inject some volatility into the global markets, with interest-rate decisions due in the euro zone, Britain and the United States. While no one expects a rate move by the US Federal Reserve when it meets on Wednesday, investors are keenly awaiting the central bank's latest assessment of the world's biggest economy.

The Bank of England is seen lifting rates to 5.5% on Thursday, a move that would put British interest rates above those in the United States for the first time since January 2006. The European Central bank is expected to hold its rates steady at 3.75 percent on Thursday but signal a hike in June.

The Dow closed at a record on Monday (7 May) for the fifth day in a row, buoyed by Alcoa's $27 billion bid for Alcan. Alcoa Inc. the world's largest aluminum company, pushed the Dow and the S&P 500 higher with a gain of 8 percent, leading the latest round of takeover deals that have lifted the market in recent months. Dow gained 48.35 points, or 0.36 percent, to end at a record of 13,312.97. Earlier, the Dow also hit an all-time intraday high of 13,317.69. The Standard & Poor's 500 Index advanced 3.86 points, or 0.26 percent, to finish at 1,509.48, off a fresh 52-week high at 1,511.00. But the Nasdaq Composite Index dipped 1.20 points, or 0.05 percent, to close at 2,570.95. Earlier, the Nasdaq also reached a new 52-week high at 2,580.06.

Benchmark London Brent crude was up 6 cents at $64.50 a barrel after slumping nearly 6 percent in as many days on growing crude inventories.