Market may undergo correction

In the near term, profit taking cannot be ruled out given that the market has witnessed sharp and swift surge over the past few days.

Q2 September 2007 results is the next major trigger for the market. Figures of advance tax suggest that earnings will be decent to strong. Stock specific activity may take place in the near term on the bourses ahead of the earnings-reporting season, based on result expectations. IT bellwether Infosys Technologies kickstarts reporting season on 11 October 2007.

FII inflow remains robust and inflow may continue in the backdrop of ample global liquidity. A sharp correction, if any, will attract bargain hunters given that domestic liquidity, too, remains strong. Domestic private insurance firms have been channelising money raised through unit linked insurance plans (with a high weightage for equities).

The market will be keenly watching developments on the political front as the government wants the Indo-US nuclear deal to go through. While the operationaslisation of the Indo-US deal has been put on hold by the government pending the findings of a committee, it cannot be stalled forever. A flashpoint may come sooner or later. The four Communist parties have 60 members of parliament (MPs) in the 545-member lower house of parliament. Prime Minister Manmohan Singh's government could fall or be reduced to a minority if the Left withdraws support.

Yet, analysts reckon that political turmoil arising from nuke deal will not impact India’s basic economic fundamentals though some infrastructure projects may get delayed. India’s economy is expected to post strong growth for a long period of time mainly due to favourable demographics.