RBI, Fed keep the markets nervous

Sensex fluctuates 700 points on global cues.

The market was on tenterhooks today even as both the indices, the Bombay Stock Exchange's Sensitive Index and the Nifty, staged a recovery in the last few hours of trading on heavy buying from domestic insurance companies.

The market is keenly awaiting a series of announcements slated for the week, including the Reserve Bank of India's monetary policy review and a two-day Federal Reserve meeting scheduled to kick off from tomorrow.

The Sensex ended at 18,152.78 points, lower by 208.88 points or 1.14 per cent, after fluctuating more than 700 points in intra-day trade. The broadbased Nifty-50 ended at 5,274.10 points, lower 109.25 points, or 2.03 per cent.

Key American indices Dow Jones (down 1.38 per cent) and S&P 500 (down 1.59 per cent) fell on subprime concerns. Most Asian markets, including Hang Seng (down 4.25 per cent), Nikkei 225 (down 3.97 per cent), Taiwan Weighted (down 3.28 per cent) and Seoul Composite (down 3.85 per cent) were deep in the red.

Taking cues from weak global markets, the Sensex opened 349.77 points down at 18,011.89 points and fell further to an intra-day low of 17,443.29 points.

Towards noon, the market began to recover with some pockets like banking and auto seeing a spurt in buying interest. State Bank of India, ICICI Bank and other banks gained due to expectations that RBI may lower interest rates, in turn helping them cut borrowing costs and boost loans.

Overall, the foreign institutional investors (FIIs) sold Rs 1,038.45 crore and domestic institutions bought Rs 597.94 crore worth of stocks.

Unwinding positions continued in the Futures & Options (F&O) segment, which also witnessed a poor build-up of fresh positions.

The traded volumes in F&O were Rs 44,464 crore on the Bombay Stock Exchange and the National Stock Exchange; with contract expiry around the corner, markets are expected to be volatile. On the cash market, the total volume was Rs 15,125.41 crore on both exchanges.

"We think the futures and options segment has been cleaned up to quite an extent but not all the poison has gone out yet," said Sachidanand Shukla, economist, Enam Securities. "We expect a repo rate cut in tomorrow's credit policy announcement," he added.

Market breadth remained poor with 863 advances to 1,852 declines. Two major initial public offers "" Reliance Power and Future Capital Holdings "" are expected to be listed by next week. As money from the refunds starts flowing in, it will provide some support to the markets, said marketmen.

"We expect the Indian markets to be range-bound in a band of 20 per cent from the peak over the next one year. However, over the long term India will continue to be a promising destination. We have, therefore, consistently been advising investors to stay invested for the long term and try not to time the market," said a note by ING Investment Managers.

The BSE auto index ended at 4926.14 points, higher 83.27 points or 1.72 per cent. The BSE bankex ended at 11,521.22 points, higher 141.45 points or 1.24 per cent.