Market may gain on firm global equities

The market may extend Wednesday’s gains tracking firm Asian markets. But the upside may be capped ahead of the outcome of assembly polls in Uttar Pradesh on Friday 11 May 2007. Corporate results announced so far have been strong. The major Q4 result today is Asian Paints. FIIs have turned sellers over the past two days which also may cap upside.

The US Federal Reserve's decision to leave interest rates on hold lifted Asian shares on Thursday. Key benchmark indices in China, South Korea, Singapore and Taiwan were up by between 0.2% to 0.8%. Japan’s Nikkei was flat and Hong Kong’s Hang Seng was down 0.2%.

US stocks rose on Wednesday after the Federal Reserve's latest policy meeting ended without any unwelcome surprises, allowing investors to refocus on the solid outlook for corporate profits. In its post meeting policy statement Fed said the economy is growing at a moderate pace, and that core inflation, while elevated, is likely to slow.

The Dow Jones industrial average gained 53.80 points, or 0.40 percent, to end at 13,362.87 -- its 21st record closing high this year. The Standard & Poor's 500 Index rose 4.86 points, or 0.32 percent, at 1,512.58. The Nasdaq Composite Index was up 4.59 points, or 0.18 percent, at 2,576.34.

At home, the undertone is cautious ahead of the outcome of the assembly election in Uttar Pradesh. Polling for the seventh and final phase got over on Tuesday (8 May) and counting of votes is due on 11 May, and results expected the same day. The UP vote is seen as a barometer of national political trends. The state was headed for a hung assembly, exit polls said on Wednesday (9 May 2007), and ebbing support for the Congress, which rules nationally, could see it delay reforms.

FIIs were net sellers to the tune of Rs 222.10 crore on 8 May compared to their inflow of Rs 96.70 crore on 7 May. As per provisional data, FIIs were net sellers to the tune of Rs 300 crore on Wednesday 9 May. FIIs had made heavy purchases in the month of April 2007 that helped the market stage a solid rebound from lower level. Their inflow in April 2007 totaled Rs 6679.20 crore.

The key economic data due on Friday (11 May) is industrial production data for March 2007. The market expectation is of a between 9% to 11% growth in industrial production in the month. Industrial production had risen 11% in February 2007 which was slightly lower than 11.4% growth in January 2007.