Market to extend gains on firm Asian bourses

The market is likely to extend gains tracking firm global markets and on the back of latest data showing a surge in FII inflow on Thursday 17 May 2007.

The market had surged, last week, tracking firm global markets, and on reports that there will be early onset of monsoon. Rally in two bank shares State Bank of India, ICICI Bank and in index heavyweight Reliance Industries (RIL) aided the rally. The 30-share BSE Sensex 507.25 points or 3.67% to settle at 14303.41 in the week ended Friday 18 May 2007. The S&P CNX Nifty rose 137.85 points or 3.3% to 4214.50 in the week.

FIIs bought shares worth a massive Rs 1060.80 crore on Thursday 17 May 2007. The large inflow came after they had pulled out Rs 470 crore in two trading sessions from Tuesday 15 May 2007 to Wednesday 16 May 2007. But their inflow was muted Rs 56.64 crore on Friday 18 May 2007, as per provisional figures. Domestic institutions were net buyers to the tune of Rs 58 crore on Friday, 18 May 2007.

Meanwhile, in a major development the Indian government late on Friday 18 May 2007 tightened overseas borrowing rules, making it harder for less creditworthy and smaller local companies to raise funds, a measure seen aimed at curbing soaring capital flows and calm the hot real estate sector. The finance ministry said in a statement late on Friday that the ceiling has been lowered to 150 basis points over six-month Libor from the earlier 200 basis points for overseas borrowings by Indian companies for maturities between three and five years.

For maturities over five years the ceiling has been reduced to 250 basis points over six-month Libor from 350 basis points. It said the ceilings had been revised in view of the upgrading of the country's sovereign credit ratings

China's stocks held steady on Monday, 21 May 2007, helping Asian markets react calmly to China's surprise move to widen the yuan's trading band and raise interest rates, while the yen slid to a record-low against the euro. Sentiment was underpinned by Wall Street, where US blue chip shares hit a record high on Friday, 18 May 2007

China's shares initially slumped more than 3% at the open in their first reaction to the flurry of monetary announcements late on Friday 18 May 2007. However, they pared back the losses to stand broadly steady later in the day. MSCI's measure of Asia Pacific stocks excluding Japan rose 0.53% to near a record high set last Thursday 17 May 2007.

Wall Street was boosted on Friday 18 May 2007 by fresh takeover activity and after a gauge of consumer sentiment rose more than expected in May 2007, reassuring investors about the strength of the US economy. Dow Jones Industrial Average gained 79.81 points or 0.59% to a record closing high of 13,556.53. The Nasdaq Composite Index gained 19.07 points or 0.75% to 2,558.45.

Brent crude oil rose 28 cents to $69.70 a barrel on Monday, 21 May 2007, while US benchmark crude gained 20 cents to $65.14, boosted by concerns over supplies from major exporters Iran and Nigeria