Boosters: Fuel rate cut, FDI cap hike

MARKET WATCH

The Street, after passing through a largely corrective week, is set for pre-Budget excitement. Usually, the Budget fervour begins to charge the market mood 10-15 days before the B-Day. Triggers such as the Centre's sustained efforts to contain inflation and anticipation of further duty cuts, besides the Budget expectations "� will keep the market chirpy.

The sentiment on last Thursday was so bullish that the National Security Advisor's statement that the equity markets were one of the "sources for terrorists' funding" fell flat on investors' ears, though NSA later clarified that he was referring to stock markets as one of the sources and in global context.

The Sensex eventually broke the trend of weekly gains seen in the past several weeks. The index finished the week 183 points lower than last Friday's close. The market has become news-driven and may continue to remain so in the coming week as well.

The week ahead will see at least one key event each on the domestic as well as the global front "� settlement of derivatives and Bank of Japan's (BoJ) meeting on February 21 to review the interest rate scenario. Against the backdrop of Japan's scorching economic growth, analysts expect the bank to hike the interest rate from 0.25 to 0.50 per cent. And this, if done, will affect global liquidity.

"The current correction in the Indian market is because of local factors "� there was no bad news on the international front. Even the US is seeing moderate growth," said Shusil Choksey, director, Rosy Blue Securities.

According to him, the market will closely watch what BoJ does, and if the rates go up and the yen moves up, it will have a cautious mood. However, the country's politicians, who have been opposing any move to hike interest rates, may prevail upon BoJ.

There were some reductions in derivative positions and now they are away from previous month's high level market don't see problem in roll over.

Last week, the hike in CRR, which happened in quick succession and by as high as 50 basis points, pressed the panic button triggering a bout of sell-off. The current situation is as such that the market is on a high despite expectation of a big correction, so any bad news is bound to trigger a sharp fall.

"Inflation-related worries and CRR hikes are local issues, while there are no bad signals affecting global liquidity. So the medium-term trend remains bullish," said an analyst with a leading local brokerage house.

Until recently, the Centre's approach to inflation has been just symbolic. An urgency to take some concrete steps was visible only when it cut fuel prices and expressed its intent to cut excise duties.

The fuel price cut, the nod for a hike in the FDI limit in insurance and some other measures, expected to be announced in the coming days, are seen as the sentiment booster in the near future.

On the other side, with the thumbs-down to M&A entities such as Hindalco, Tata Steel and Suzlon affecting the sentiment last week, market players have learnt that buying overseas may mean stocks suffering in the short term.

Many more are going overboard on going global. Investors should read into these and then decide whether to run after those companies based on tips from news reports, especially when the entities in question are small- and mid-caps, or lesser known.