Domestic bourses to track weak global stocks

A fresh setback in global markets will result in a further fall on the domestic bourses today, 8 October 2008. Investors are unlikely to build large positions as the market remains closed tomorrow, 9 October 2008, on account of Dasara. Some of the equipment makers for the nuclear power plants may rise on reports India and United States are likely to sing the civilian nuclear deal on Friday, 10 October 2008.

US stocks plunged on Tuesday, 7 October 2008, amid escalating worries about credit markets and the financial sector. The Dow lost more than 500 points and all the major indexes slid more than 5 percent. The Standard & Poor's 500 index saw its first close below 1,000 in five years. Steps by the Federal Reserve to reinvigorate the dormant credit markets ultimately weren't enough to calm nervous investors.

Key benchmark indices in Asia were down by between 2.9% to 5.7% today, 8 October 2008, even as central banks across Asia stepped up to offer more support to commercial banks on to try to ease painful pressure on funding costs from a vicious global credit squeeze.. The troubles that started with an overheated housing market in the US have infected financial markets around the world, making banks fearful of lending to other banks, let alone to businesses and consumers.

Back home, after Monday's (6 October 2008) heavy slide, the market witnessed highly choppy trade on Tuesday, 7 October 2008. While the 30-share BSE Sensex slid 106.46 points, the S&P CNX Nifty rose 4.25 points.

Foreign institutional investors (FIIs) have been pulling out their investments from India and other emerging markets to shore up resources to beat the global liquidity crunch. In India, FIIs sold shares worth a net Rs 8278.10 crore last month. The outflow has reached Rs 39159.10 crore in calendar year 2008 (till 6 October 2008).

As per provisional data released by the stock exchanges, foreign funds sold worth a net Rs 680.42 crore on Tuesday, 7 October 2008. Domestic funds bought shares worth a net Rs 548.29 crore.

Meanwhile, with the end of third quarter of the calendar year 2008 on Tuesday, 30 September 2008, hedge fund are bracing for heavy redemption amid US financial sector crisis which has already spread to Europe. Investors in hedge funds are usually allowed to exit funds only on the final day of the financial quarter. Large-scale investor redemption in hedge funds may trigger further selling by foreign funds in India. Hedge funds mainly operate through the participatory notes route in India. However, there is no data available on the quantum of hedge funds' investment in India.

The barometer index is down 8,591.75 points or 42.35% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 9,511.53 points or 44.85% below its all-time high of 21,206.77 struck on 10 January 2008.

Meanwhile, as per reports, United States and India plan to sign a potentially lucrative agreement on Friday, 10 October 2008, to open up nuclear trade between the two countries for the first time in three decades. The pact will provide India with access to US nuclear fuel, reactors and technology, overturning a ban on such trade instituted after India first conducted a nuclear test in 1974.