K. S. Badrinarayanan
|Progress in monsoon, advance tax numbers could set direction|
Slide continues: Stockbrokers react at the weak closing of the benchmarks, as there was no respite from selling pressure.
Notwithstanding, rising inflation and a fresh spat between the Ambani brothers, the market may see some buying at lower levels as it is in oversold zone and might consolidate a bit before taking fresh directional call.
The positive closing of the US markets on Friday is likely to help the equity markets across the world open on a firm note on Monday. And, thanks to Saudi Arabia's indications that it is willing to raise oil production (by about half a million barrels a day to 10 million barrels, according to media reports), oil prices may cool-off a bit, at least temporarily, and that could soothe sentiment for equity markets.Important cues
Though these positives may give a head start for the domestic market, to sustain the rally, it needs fresh impetus from other fronts as well.
For instance, advance tax payments for the first instalment in 2008-09 for corporates fall on June 15. This would provide some cues on expected first quarter earnings by Corporate India.
Progress of the monsoon has been viewed keenly by market players. With the Government pinning hopes on the monsoon to help cool-off food prices, which pushed inflation to its highest level since February 10, 2001 to 8.75 per cent, sentiment hinges on the monsoon outlook.Inflation menace
Widespread anticipation is that inflation may cross the psychological 9 per cent mark this week, as numbers will reflect the recent hike in fuel prices. Already there are demands (from both the Left and Right parties) seeking the resignation of the Finance Minister, Mr P. Chidambaram, for his failure to arrest the inflation. There are apprehensions in some quarters that the Government would resort to further tightening measures to check spiralling prices.
There are also fears that RBI would be compelled to raise interest rates at least by quarter percentage point if inflation surges past the 9.25 per cent mark.
Meanwhile, a few brokerages are coming out with earnings downgrades for Indian Inc following the recent 25 basis point hike in repo rate (short-term lending rate), as they expect this could impact future earnings growth besides delay in expansion plans, (particularly capital good segments).Dumping by FIIs
Another major worry for the market is the selling spree of foreign institutional investors. They were net sellers to the tune of Rs 6,463.2 crore in June so far and about Rs 21,833 crore in 2008 till now.
A section of the market is of the view that the cold-storage treatment to Indo-US nuclear deal has driven away some foreign investors who entered India betting big on that sector. However, some in the market now hope that the UPA Government will go ahead with the deal despite the Left parties' threat. If that happens, we could see the arrival of foreign investors to Indian shores once again.