Profit taking may cap gains

Subdued-to-weak trend in Asian stocks may trigger profit taking on the domestic bourses after a recent steep rebound from a sharp fall. But data showing foreign funds buying for the second day in a row on Monday, 3 November 2008, and signals of a soft interest rate regime may cap the downside.

Japan's Nikkei index rose nearly 4% on Tuesday, 4 November 2008, as exporters gained on the yen's recent weakness, but other markets were down after reports pointed to a shrivelling US economy ahead of the US presidential election. Key benchmark indices in Hong Kong, China, Singapore and Taiwan were down by between 0.58% to 1.98%.

Wall Street ended the calmest session in recent memory with a narrowly mixed performance Monday, 3 November 2008, as investors largely looked past a weak reading on the manufacturing sector and focused on the election. The Dow Jones industrial average fell 5.18 points or 0.06%, to 9,319.83. The Standard & Poor's 500 index fell 2.45 points or 0.25%, to 966.30, while the Nasdaq composite index rose 5.38, or 0.31%, to 1,726.33.

Back home, as per provisional data released by the stock exchanges, foreign funds bought shares worth a net Rs 363.55 crore in India on Monday. They had bought shares worth a net Rs 1183.20 crore on Friday, 31 October 2008. FIIs have sold heavily in India and other emerging markets this year to shore up resources to beat the global liquidity crunch. The outflow reached Rs 50955.80 crore in calendar 2008 so far (till 31 October 2008).






Marketmen will watch the outcome of the meeting of Finance Minister P Chidambaram with the chiefs of state-owned banks. The meeting may set the tone for the state-run banks to cut lending and deposit rates, after the Reserve Bank of India (RBI) on Saturday, 1 November 2008, unexpectedly cut its main short-term lending rate viz. the repo rate to ease a growing cash squeeze, spur faltering economic growth and fend off damage from the global financial crisis. The RBI decision boosted the BSE Sensex 5.62% on Monday, 3 November 2008. Lower rates boosts stocks as they help lift corporate bottomline by way of lower borrowing costs.

The market has staged a solid rebound after a recent steep fall. From a low of 8,509.56 on 27 October 2008, the BSE Sensex jumped 1,828.12 points or 21.48% in four trading sessions to 10,337.68 on Monday, 3 November 2008