A surge in crude oil price may weigh on the bourses ahead of the expiry of March 2007 derivative contracts on Thursday (29 March). However, a resumption in FII-buying as well as steady-to-firm Asian markets may cap the downside.
Asian markets were mostly in the green on today, as a 3.9% rise in sales of existing US homes in February, the largest in three years, helped ease worries about a broader US economic slowdown. However, gains across the region were muted. Key benchmark indices in Hong Kong, China, South Korea, Singapore and Taiwan were up between 0.01 - 0.71%.
US blue-chip stocks crept higher on Friday, as tension in the Middle East lifted oil prices and hence shares of energy companies. The Dow Jones industrial average rose 19.87 points, or 0.16%, to end at 12,481.01. The Standard & Poor's 500 Index inched up 1.57 points, or 0.11%, to finish at 1,436.11. But the Nasdaq Composite Index slipped 2.81 points, or 0.11%, to close at 2,448.93.
US crude oil futures reached their best level of the year so far at $62.79 barrel amid rising global political tension over Iran's nuclear programme. Iran, the world's fourth-largest oil exporter, said on Sunday it would not stop its atomic programme, which it says is only for peaceful purposes, and that it will limit cooperation with the UN's nuclear watchdog in retaliation for new financial and arms sanctions. The West fears the programme can be used to develop nuclear weapons.
The UN Security Council unanimously approved the sanctions on Saturday for Tehran's refusal to suspend its programme, but major powers also offered new talks and renewed an economic and technological incentive package offer. The developments have renewed market concerns that Iran could one day cut oil exports to strike back at the West.
At home, volatility may remain ahead of next week’s expiry of March 2007 derivative contracts. With the market scheduled to remain closed tomorrow (27 March) for a public holiday, only three trading sessions are left for the expiry of the March 2007 contracts.
FIIs substantially stepped up buying of Indian equities on Thursday (22 March), the day when the domestic bourses had surged in a rally across global bourses triggered by hopes of a cut in interest rates in the US. FIIs were net buyers to the tune of Rs 713.10 crore on Thursday compared to an inflow between Rs 136 crore and Rs 165 crore in the earlier two trading sessions, on Tuesday (20 March) and Wednesday (21 March). As per provisional data, FIIs were net buyers to the tune of Rs 127 crore on Friday (23 March 2007).
The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008.
The Indian bourses last week recorded its first weekly gain after five consecutive weekly losses till the week ended 16 March 2007, partly due to short-covering in derivatives and partly due to firm global markets.