Weakness may persist

The market may remain under pressure next week as US financial sector woes continue to weigh on the investor sentiment. Problems at US investment bank Lehman Brothers reminded jittery investors that the global credit woes were yet to run their course, triggering worries of more withdrawals by foreign funds who have pressed heavy sales on the domestic bourses this year.

According to reports, the US Treasury and the Federal Reserve have been working on prospects of Lehman Brothers’ sale. Potential suitors include several big banks including Bank of America, HSBC, Nomura, Credit Suisse, Barclays and Deutsche Bank, as well as several private equity companies. The deal may be announced before Asian markets open on 15 September 2008, reports suggest.

Software stocks will be closely watched. According to reports, IT businesses in developed countries have cut their IT budgets by 40%.

A softening of inflation for a third consecutive week has raised hopes that Indian market may in the last lap of the interest rate hike cycle. Inflation based on the wholesale price index rose 12.10% in the 12 months to 30 August 2008, below the previous week's annual rise of 12.34%, data released by the government on 11 September 2008, showed. Inflation, however, remains far above central bank’s target level of 7% towards the year ending March 2009.

The sharp fall in oil prices to $101 per barrel on 12 September 2008 from a record high of $147.27 a barrel struck on 11 July 2008 augurs well for the global economy. The sharp fall in oil prices will help reduce inflation worries.

Better-than-expected industrial production data may boost capital goods stocks. Industrial output rose 7.1% in July 2008 from a year earlier, above the previous month's 5.4% rise, data released by the government on 12 September 2008, showed. The figure was above market expectations of a 6.5% growth. Manufacturing production rose 7.5% in July 2008 from a year earlier.

The market will closely watch developments on the Indo-US nuclear deal. The 45-nations Nuclear Supplier Group (NSG) on Saturday, 6 September 2008, lifted a 34-year-old embargo on nuclear trade with India. The NSG’s acceptance of the US proposal to drop a ban on nuclear trade with India will now put the Indo-US nuclear deal on the fast track. However, the nuclear deal still needs to be ratified by the US Congress before it could take force. The Congress must act before adjourning in late September 2008 for US presidential elections. If that does not happen, the deal could be left to an uncertain fate under a new US administration that takes office next year.

Foreign institutional investors (FIIs) sold shares worth Rs 2935.90 crore in the first few days of September 2008 (till 11 September 2008). They sold shares worth Rs 31449.70 crore in the calendar year 2008 so far (till 11 September 2008). Mutual funds bought shares worth Rs 61.70 crore in September 2008 (till 10 September 2008).