Weak Wednesday on cards at bourses

FINANCIAL YEAR-END OBLIGATIONS, CLOSING OF ACCOUNTS TO KEEP INVESTORS ON THE SIDELINES

Key indices will extend losses Wednesday, a day ahead of the close of 2004-05 as financial year-end obligations and closing of accounts would keep investors on the sidelines.

On the charts too stocks looked weak as support levels were broken on Tuesday.

Tuesday, Bombay Stock Exchange's 30-share Sensex ended at 6367.86, down 142.88 points or 2.2 per cent. National Stock Exchange's 50-share Nifty closed at 1983.85, down 45.60 points or 2.2 per cent.

The next support level for the Nifty is 1950, said Viral Doshi, technical analyst with Networth Stock Broking.

Tuesday, the Nifty broke below strong support 2005 while Sensex broke below the strong supports 6490 and 6400.

Shares of companies in pharmaceutical and fast moving consumer goods sectors are likely to act as defensive bets, dealers said. Pharmaceutical stocks performed well on Tuesday.

Amidst talk of a sharp rise in US interest rates, some investors here worried that foreigners may shift their investments from stocks and emerging markets such as India.

This month, investments by foreign institutions in Indian stocks has been strong at over US $2 billion up to Monday. In February it was also more than $2 billion.

A couple of weeks ahead of the start of earnings season, investment bank JM Morgan Stanley said corporates' revenue growth may slow down.

"In addition to a possible shock to consumption, corporate revenue growth could also face pressure from a cyclical slowdown that already seems to be in place," it said Monday in a note titled "Don't take earnings for granted".

The investment bank said rising interest rates and weaker earnings could lead to India under-performing emerging markets.

"There is a year-end churning of portfolios, plus regional markets were very weak, and domestic funds and retail buyers are staying out of the market, so there was no buying support," said Mitesh Mehta, vice president of equity sales, LKP Shares.

Tuesday's fall was also precipitated by the upcoming rollover of monthly derivatives contracts and fears that a stronger dollar will see a flight of foreign funds from emerging markets.

"But the market should start improving with greater liquidity coming in and with the first of the quarterly earnings and guidance for the next fiscal year," said Mehta.

"Given the sharp fall in stocks, there were some concerns about a slowdown in foreign fund inflows, which kept the dollar well bid," said a dealer at a foreign bank.

But some market watchers expected Indian stocks would recover with quarterly earnings and guidance for the next fiscal year that starts on April 1. Software services firms will start reporting full-year and January-March earnings in mid-April.

Government securities were weighed down after the Reserve Bank of India said late on Monday the government planned to borrow Rs 83,000 crore over the first six months of the next fiscal year "" more than the Rs 80,3500 crore in the current year to March 31.

The yield of the 10-year benchmark bond ended at 6.6668 percent on Tuesday, higher than Monday's 6.6462 percent.