F&O settlement, Fed meet hold the key

MARKET WATCH

The stock market closed with a weekly gain of 305 points for the Sensex, but next week will be crucial as an all-time high derivatives open interest settlement falls during the week. The US Federal Reserve meet scheduled in the week can provide cues to the global markets. Speculation related to the first quarter corporate results will also play a role.

"There may not be big positive surprises in the first quarter results," said Vibhav Kapoor, group chief investment officer, IL&FS. Another fund manager said that "the impact of a stronger rupee will be seen in the results".

Technically, the market is hovering around its strong resistance level. The Sensex had reversed from this level recently without even crossing an all-time high, though the Nifty had crossed its all-time high. Squaring off of long positions and profit- bookings may see some downside, but the Nifty has strong support between 4,100 and 4,000 levels.

Situation in the derivatives segment is such that "a lot of put calls have been written around the 4,200 levels. Hence, derivatives may see a close below that level and the target is 4,160-4,170", said Siddharth Bhamre, fund manager, Angel Broking.

During the last weekend, open interest was around 67,000 crore and the Nifty around 4,100. But short- covering helped recovery and new long positions were created. The market may not see a big fall as put calls were bought at 4,200 in the July series. Foreign institutional investors have made big purchases here for hedging. Their strategy will decide the trend. Current open interest is around 74,000 level.

Meanwhile, June proved to be one of the most successful months for raising funds from the primary market. Despite two mega issues, the market was not affected. This shows that there is enough liquidity in the market.

S Subramanian, head, investment banking, Enam Financial Consultants, said, "In the current month, $10 billion worth of funds are being raised from the Indian and the US capital markets."

DLF has already raised more than $2 billion from the domestic market. ICICI Bank is raising $5 billion through FPO and ADR ($2.5 billion). Sterlite raised $2 billion through ADR on the NYSE. This is the second largest offering by any Indian company in the US ADR market. More than $1 billion is being raised by UTI Bank and HDFC Bank. Of the $10 billion, Enam managed issues worth $7 billion.

Since FII investment is huge in the two mega issues and because they pay only 10 per cent of the money when shares are allotted, their balance payment will be due. It is to be seen if they are bringing in fresh money or booking profit to make the payment.

Globally, the US Fed meet will give some cues, though big surprises are not expected. But on Friday, the US markets closed lower, breaking a longer trend of a higher weekly close. This may lead to the lower opening levels on Monday in the local market too. In the US, subprime mortgage worries have surfaced again leading to a fall in the share prices of financial services companies. There are concerns that banks will be saddled with losses on mortgage bonds.