Morning Commentary - May 31 2007

Markets could open up with a gap as markets elsewhere overcome the Chinese market fears

Markets in India opened in the negative on Wednesday and made an attempt to rise. They went into positive territory around 1145 Hrs but failed to stay above these levels for long. They once again began to fall and closed almost at the intra day low. These moves reflected moves in the Chinese and European markets. Ultimately the frontline indices closed 0.67-1.02% lower on volumes that were 19% above the previous day's volumes on the NSE. Advance decline ratio plunged sharply to much under 1:1. IT, Nifty Junior, FMCG, Metals indices fell while Capital Goods, Consumer Durables, indices did well.

Markets in the US gained for the third day in a row on Wednesday as Dow and S&P closed at all time highs while the Nasdaq closed at a 6 year high. Release of minutes of Fed meeting held on May 09 suggested that Fed officials were less concerned about economic growth than inflation. These helped the US markets to overcome jitters arising out of a rout in the Chinese equity markets. Gold and Non Ferrous metal prices were down while Oil prices rose marginally. Latin American markets rose sharply in line with the US markets. Indian ADR prices were mixed as Wipro, ICICI Bank and MTNL gained while the other stocks were either flat or down. Asian markets this morning are up by 1 to 1.6% following the rise in US markets overnight. The Chinese markets after opening 5% lower this morning are only about a percent lower at the time of writing this piece.

FIIs were net buyers of Rs.837 cr in the cash markets on Tuesday and net sellers of Rs.220 cr in the F&O markets. Mutual Funds were net buyers of Rs.4 cr. As per the provisional numbers, FIIs were net sellers of Rs.599 cr in the cash markets and net sellers of Rs.307 cr in the F&O markets on Wednesday.

Markets in India could open with an upgap on Thursday as they shake off the fears arising out of Chinese market weakness. Derivatives expiry related volatility could be witnessed during the day. IT and Metals indices could continue to underperform. Bharat Forge, Infosys, ITC, SAIL could underperform while Amtek Auto, BEL, GE Shipping, Jet, L&T, Reliance could outperform. We could close the day with a gain.