The Hindu Business Line : Global cues may decide direction

With the Indian market too strongly interlinking itself to global happenings, the trend may largely be dictated by global cues rather than domestic events. The markets may begin on a promising note despite the benchmarks being at new peaks, as the US markets ended Friday on a strong note.

Ample liquidity, particularly from FIIs, will drive the market further up. The sustainability of the rally would, however, depend on how the global markets, particularly in the US, behave in the days ahead.

New peaks everywhere

It’s not India alone. Last week saw quite a few global markets reaching new peaks – the Dow Jones Industrial Average, S&P 500, Korea’s Kospi, Australia’s All share Index, Brazil’s Bovespa … the list goes on, as foreign fund flows hit record levels in almost every country.

The main trigger for the indices to go a tizzy last week was the news on the merger and acquisition front.

The Rio Tinto Group’s $38-billion bid for Alcan sparked speculation of more takeovers across the globe, particularly in the metal space.

World metal stocks surged sharply on the back of M&A hopes and also on strong LME prices.

It seems that worries of US sub-prime market have taken a backseat, at least for the time being, on the back of stronger-than-expected sales at US retailers including Wal-Mart.

Nothing is negative

It seems nothing is negative on the horizon at this point of time, both in India and globally, as the markets gather momentum.

With fund flows in such force, market participants are discounting negative factors.

Last week, two companies from different sectors – Infosys Technologies and Bajaj Auto – came out with numbers.

Infosys, despite announcing strong results for the quarter ended June, gave cautious outlook due to the appreciating rupee.

Bajaj Auto, however, reported weak performance for the quarter. But the broad market ignored both developments and maintained the momentum.

Also, crude prices, which has been a market dampener on earlier occasions, has not been influencing market trend of late. As per latest data, Brent crude has been hovering around $74 a barrel.

TCS, Wipro turn

This week, a host of companies will come out with numbers. With Infosys failing to enthuse market confidence for IT sector, performance from TCS and Wipro is keenly watched.

DLF, L&T, Reliance Energy, UltraTech Cement, MTNL and Zee Entertainment will also announce their quarterly results.

In the mid-cap space, companies such as Sesa Goa, IDBI, Ashok Leyland, Garware Offshore Services, Tata Coffee, Shanthi Gears and Zensar Technologies are expected to announce numbers.

FIIs catching up with 2006

Foreign funds have bought equities worth $7.873 billion so far in 2007, almost equalling the $7.993 billion they bought over the whole of 2006.

DLF and ICICI Bank public issues could be the major driving force (to the extent of almost $2 billion) behind FII investments.

In rupee terms, overseas funds were net buyers to the tune of Rs 14,381.40 crore in July so far, and Rs 33,313.40 crore in 2007.

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