INDIAN STOCK MARKET: IS IT TIME TO JUDGE THE VALUATION?

The Bull-run

One of the major factors behind the bull-run of 2007 was the USD 17 billion of foreign money that came into India which was mostly speculative money. Not long term capital that large pension funds invest with a 10 year and 20 year time frame. But quick, in-and-out money that hedge funds were happily gambling with. The swine flu of the western capitalist society had invaded India. Such “hot money” began to fund highly irrational ventures – like this concept of land banks accumulated by various real estate developers. But the injection of this money itself made the irrational, look rational. Every barren piece of land stolen from illiterate villagers was seen as a glossy township with billions of dollars of future cash flow.

 

The fall

The Indian stock markets wobbled from their January 2008 peak largely because of the fears of inflation. The price of commodities including oil and wheat had surged. India was seen to be a victim of a high inflation environment. When India did actually face a threat and problem from the global economic crisis and financial meltdown, the policy makers were helpless. And thus when the global crisis hit – India, one of the lesser affected economies – was one of the worst hit stock markets in the world. Market fell from 21000 levels to 14000 levels. But again the markets fell to 8,000 after September 15, 2008 when Lehman went bust.  That is because the foreign hedge funds went scrambling back home with their cash. And there was no buyer to absorb their vicious selling.

 

The Comeback

The BSE 30 Index was stuck in the 8,000 to 10,000 range for 5 months between October 2008 and March 2009. But, after breaking the 10,000 barrier in March, the market marched on relentlessly to 12,173 on May 15th – the last trading day before the election results. And after the election results the index surged dramatically to 15000 plus levels. This rise was so rapid – and against the mainstream thinking – that most people were left out. In fact, many lost money by going “short” – betting that the markets would decline.

 

What next?

The BSE-Sensex has moved up by nearly 80% from the bottom. Back then, the index was trading at an attractive price to earnings valuation of 12 times. Presently it is trading at about 20 times. Historically, it is believed that the BSE-Sensex has traded at a price to earnings multiple of around 15 to 16 times. Therefore, if one wishes to view this from an FY11 perspective, considering that we expect returns of 12%-13% on a CAGR basis from the Sensex, the earnings of the companies that comprise the Sensex will have to grow at a CAGR of 27%. And therein lies the difficulty. For a GDP that is expected to log in nominal growth rate in the region of 10%-12%, a 27% CAGR in earnings looks a tall order indeed. Thus, unless there is a significant re-rating of the Sensex, where in the P/E remains the same or goes even higher, things do not look rosy for an investor from a FY11 perspective. He will have to rely on his stock picking skills to achieve any outsized returns.

 

The BSE-Midcap Index also has moved up by nearly 108% in the last three months. From a valuation of 9 times that it garnered during the first week of March, currently the index is trading at a multiple of 17 times. On the other hand, the BSE-Smallcap Index has moved up by 123% in the past three months and is currently trading at a price to earnings multiple of 14 times. Three months back it was trading at a multiple of 6 times. Although these indices are not as steeply priced as the Sensex, the upside, if any, is likely to be only marginal from the current levels.

 

Thus, unless earnings re-rate dramatically, fundamentals, at least in the medium term, point towards a correction of the magnitude of 20%-25%, which will again take us back to the fair valuation range.

 

By:  TheStockWorld.com

INDIAN STOCK MARKET REVIEW: 1ST SEPT 2008

MARKET MAY EDGE HIGHER WITH POSITIVE CUES

Better than expected inflation numbers and in-line Q1 GDP growth helped the bulls to take charge and the Indian equities managed to close with modest gains in a volatile week. Frontline indices reacted positively to fall in inflation and witnessed sharp run up despite slow down in Q1 GDP growth. Rate sensitives, infrastructure, oil, metal and technology stocks led the rally. Midcap and small cap stocks also sailed in the same boat. Sensex rose 163.04 points or 1.13% to 14,564.53 in the week ended Friday, 29 August 2008. The S&P CNX Nifty gained 32.55 points or 0.75% at 4,360 in the week.

The market started the week with marginal gains on falling crude oil prices and reports of near-normal monsoon. The market slumped later on expectations of higher weekly inflation figures. However, the market ended the week on a buoyant note as inflation fell for the first time in 28 weeks. Inflation declined to 12.40% for the week ended August 16 as against 12.63% due to lower prices of some minerals and fuels.

Gross Domestic Products (GDP) growth has declined to 7.9% in the first quarter as against 9.2% in same period of last year and 8.8% in previous quarter. These numbers were not a big disappointment for markets as numbers were in line with analysts’ expectations and seemed like already factored in by markets.

In the coming week, marketmen expects that gains will be extended further however a further rise in crude oil prices may act as a spoilsport for the stock markets. Also the market will closely watch developments on the Indo-US nuclear deal in the coming week.

Technical View: Sensex made a low of around 14000 close to the 50 % retracements. Inflation and crude cues are giving a positive cue to markets for a while but the range bound markets could remain for some more time to come.

Stock to Watch: IDFC, RCOM, CENTURYTEX.

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INDIAN STOCK MARKET WEEKLY REVIEW

WEEKLY UPDATE: 18th AUGUST 2008 - 22nd AUGUST 2008
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Market lost the steam after a five day rally to edge lower in truncated week due to poor industrial growth, fall in car sales after 33-months and rebound in crude oil prices from a 3-month low. The sentiment turned bearish after the Prime Minister’s Economic Advisory Committee (EAC) trimmed its forecast for GDP growth in FY09 to 7.7%. It also expects inflation to shoot up to 13% shortly before it softens. The BSE Sensex and the S&P CNX Nifty settled below their psychologically important levels of 15,000 and 4,500 respectively. The barometer index BSE Sensex declined 443.64 points or 2.92% to 14,724.18 in the week ended Thursday, 14 August 2008. The S&P CNX Nifty lost 98.80 points or 2.18% at 4,430.70 in the week.

Interest-rate sensitive sectors bore the brunt of the selling after EAC indicated a slowdown in GDP growth and its expectations of higher inflation. Also, concerns about shrinking economic growth in key global economies and continued financial sector woes had an adverse impact on the sentiment. Slowdown in industrial production hit the capital goods stocks. Metal and power stocks were the other major losers. IT stocks bucked the negative trend to close higher after the Rupee depreciated to 42.90 against the US Dollar.

Inflation had hit 12.44% and remains a major concern for the central bank. High inflation will mean that tight monetary policy stance by the central bank may continue. On 29 July 2008, the Reserve Bank of India (RBI), at its quarterly policy review late month raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. And this relentless monetary tightening by the RBI has finally started to catch up with industrial growth. A slowdown in the manufacturing sector pulled down India’s industrial growth in June 2008 to 5.4% from 8.9% a year ago. This is however higher than 4.1% growth as per revised figures in May 2008. The index of industrial production (IIP) went up 5.2% in Q1 June 2008 compared to 10.3% in Q1 June 2007.

In the coming week, sentiment is likely to remain edgy in the near term dampened by a series of negative news. Car sales recorded a dip in sales for the first time in 33 months as interest rates, inflationary pressures and hike in fuel prices dented demand. Passenger car sales declined 1.7% to 87,724 units in July 2008 over July 2007, according to data released by the Society of Indian Automobile Manufacturers. With no key events scheduled in the forthcoming week, the Indian stock market will closely watch global stock markets for direction. However, on the positive side, a further fall in crude oil prices may boost the sentiment. Crude oil prices have declined sharply from record high $147.27 a barrel hit on 11 July 2008. US crude settled below $114 on Friday, 15 August 2008 due to stronger US dollar.

From 21^st August, NSE will introduce 39 new stocks to the F&O segment. They are ABG Shipyard, Akruti City, Asian Paints, Balaji Telefilms, Concor, Core Projects, Deccan Chronicle, Dish TV, Everonn, Firstsource, GSPL, GTL Infrastructures, HCL Infosystems, Indiabulls Real Estate, ICSA, KLG Systel, KS Oils, MIC Electronics, Mindtree Consulting, Mercator Lines, Monnet Ispat, MRF, Nava Bharat Venturs, Noida Toll, Opto, Orbit Corp, Prism Cem, PTC, Reliance Ind Infra, Sintex, SREI, Thermax, Torrent Power, TV18, UCO Bk, UTV, Voltamp, Walchandnagar.

Marketmen will also watch the review of PN notes by SEBI. It is anticipated that SEBI may extend the period for unwinding PNs, on underlying derivatives from 18 months to 24 months.

Technical View: Sensex has given a weekly close below 15050 and broken the bearish Rising Wedge pattern. Therefore, it can test the previous low of 12500 again in the coming days as a measured objective of the Wedge. However, multiple support levels exist for Sensex at the region 14400-14600. below that 14000-14050 and 13650-13700 are the levels to watch. For Nifty, 4370-4390 may provide a bit of cushion below that levels are 4320/ 4220/4150/4120.

From the F&O perspective, only Nifty 3900 put saw any significant buildup. On the other hand, 4500 and 4600 calls have been written a lot. So it looks like that market participants are far more interested to write calls as if they are expecting a level of 3900 in this expiry itself.

VIX has taken support and bouncing back to higher levels means markets are going to be choppy and volatile.

INDIAN STOCK MARKET WEEKLY REVIEW

WEEKLY MARKET UODATES: WEEK STARTING 10th AUGUST 2008

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A host of positive factors like sharp fall in crude oil prices, recovery in rainfall and buying by foreign institutional investors helped Sensex close above crucial 15,000 mark. For the week ended August 9, the Sensex settled at an eight-week high of 15,167.82, a net rise of 511.13 points (3.49%) from the previous weekend’s close. The Nifty gained 115.95 points (2.63 percent) to close the week at 4,529.50 from last weekend’s close.

 

Crude oil prices declined sharply from a record high $147.27 a barrel hit on 11 July 2008. Oil held near $115 a barrel on weekend giving a positive breadth for the equity market. India’s monsoon was above average for the first week in August 2008, helping ease a dry spell that had threatened to delay sowing of crops including rice and cotton.

 

Foreign institutional investors (FII)’s bought shares worth Rs 1527.90 in the first few days of August 2008 (till 7 August 2008). FIIs sold shares worth Rs 25774.20 in the calendar year 2008, till 7 August 2008. Mutual funds sold shares worth Rs 286.10 in the month of August 2008 (till 7 August 2008).

 

Amid some positive factors, inflation still remains a major concern for the central bank. Inflation based on the wholesale price index rose 12.01% in 12 months to 26 July 2008, slightly above the previous week’s annual rise of 11.98%.

 

Reserve Bank of India (RBI) on 29 July 2008, raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. The central bank left its reverse repo and bank rates unchanged. Responding to the RBI’s monetary tightening, top lenders HDFC and ICICI Bank and a number of state run bank have raised interest rates.

 

In the coming week, the market will take cues from June 2008 industrial production figures which the government will release on Tuesday, 12 August 2008. Falling crude oil prices and improvement in south west monsoon will provide some relief to investors. Rising inflation remains a major worry for the markets in the medium term. Marketmen will keenly watch the development of India’s nuclear deal with US. The Board of Governor of the International Atomic Energy Agency (IAEA) on 1 August 2008 unanimously adopted the India-specific safeguards agreement, a key step in operationalisation of the Indo-US nuclear deal.

INDIAN STOCK MARKET UPDATES

WEEKLY MARKET UPDATE: 4th AUGUST 2008

With the Q1 June 2008 earnings season over, global developments are likely to come back as the driving force of Indian stock market after a brief rally seen over the past few days on domestic factors like expectations for economic reforms being taken forward. The market will now closely watch movement in crude oil prices and global stock markets. A further slide in oil price may boost investor confidence in the short term. The marketmen see falling crude oil prices as a positive cue for the bourses, but expect persisting concerns for the US economy to continue to limit any major upsurge here. On the domestic front, the bullish investors are pinning their hopes on some boost from the progress in the proposed India-US nuclear deal, besides some support from banking sector, especially on expectations for progress on some key financial sector reform bills.

 

The highly volatile July 2008 series of derivative contracts expired on Thursday, 31 July 2008 with poor rollovers. As per reports, Nifty rollover of positions from July 2008 series to August 2008 series stood at 65.05% as compared to 70.07% in the previous series. Even in single stock futures, rollovers were relatively muted at 79.19% compared to 82.05% in the previous series.

 

Stubbornly high inflation still remains a concern. Again, the market trend is likely to dictated by the progress of the monsoon. India’s annual monsoon rains from 17 to 23 July were 33% below the long-term average. Rainfall since 1 June 2008 has been 2% below the same average.

 

Stocks of the public sector units will continue to remain in focus as there are expectations that the government may push forward some economic reforms, which were stalled over the past four years due to opposition from Left parties. Left parities had stalled privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal norms for foreign bank.

 

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INDIAN STOCK MARKET UPDATES

WEEKLY MARKET OUTLOOK: 28TH JULY 2008

 

THE WEEK THAT WAS
Trading for the week started on an upbeat note. Markets galloped after the Congress-led coalition government won a confidence vote in parliament late on Tuesday, 22 July 2008, raising hopes for economic reforms. The 30-share BSE Sensex surged 838.08 points or 5.94% at 14,942.28 and the broader based S&P CNX Nifty advanced 236.70 points or 5.58% at 4476.80, on that day. However the market snapped its five-day rally and sink deep in red on the back of continued profit booking and weak global cues followed by the week sentiment of seven blasts that took place in Bangalore. Markets ignored stability in crude price and steady inflation numbers. The BSE bank, oil & gas, realty and capital goods stocks witness heavy selling pressure. Power, metal, auto and IT indices were also closed negative. More pressure was seen from domestic financial institution and life insurance companies.

Reliance Industries reported 13.2% growth in net profit to Rs 4110 crore on 40.65% increase in total income to Rs 41,805 crore in Q1 June 2008 over Q1 June 2007.

Reliance Communication galloped 15.60% to Rs 503.10 after it called off tie-up talks with South Africa’s MTN Group, Africa’s biggest mobile phone group, citing legal issues.

India’s largest listed cellular services provider by sales Bharti Airtel reported 44.86% growth in net profit to Rs 2046.79 crore on a 39.72% increase in revenue to Rs 7952.32 crore in Q1 June 2008 over Q1 June 2007.

Banking shares advanced in anticipation of reforms in the banking sector after the UPA government won trust vote in parliament. The Union cabinet approved the merger of unlisted State Bank of Saurashtra with its parent State Bank of India (SBI) on Thursday, 24 July 2008.

Ranbaxy Laboratories said a UK court had quashed the country’s Serious Fraud Office’s (SFO) prosecution of the firm’s subsidiary. Ranbaxy said in a statement the English Crown Court had also declined an application by the SFO for permission to appeal to the English Court of Appeal.

Shares of firms which are potential beneficiaries of the Indo-US nuclear deal surged after the Indian government won parliamentary vote of confidence clearing the way for the landmark civilian nuclear deal with the US. They are- Reliance Infrastructure, Alstom Projects, Rolta India, Walchandnagar Industries, Areva T&D, Larsen & Toubro, NTPC all surged during the week.

Inflation based on the wholesale price index rose 11.89% in 12 months to 12 July 2008, below the previous week’s annual rise of 11.91%, government data released on 24 July 2008 showed. Inflation for the week ended 17 May 2008 was revised upwards to 8.66% from 8.10%.

THE WEEK AHEAD
Volatility will rule the the bourses next week. The Reserve Bank of India (RBI)’s monetary policy review, futures & options expiry for July 2008 series, progress of monsoon, and results of key index pivotals will dictate the trend.

Soaring inflation which is hovering near 13-year high has been a key concern for the financial markets. The Reserve Bank of India (RBI) is set to review the monetary policy on 29 July 2008. RBI may further hike short-term interest rates or the repo rate as well as statutory deposit requirements or the cash reserve ratio (CRR).

The progress of the monsoon will also be watched very closely, as it will influence the GDP figures. Monsoon rains were 33% below average in third week of July 2008, according to Indian Meteorological Department. Scant rainfall is bad news for the government, which is battling runaway inflation, which has surged to a 13-year high, largely due to a sharp rise in commodity prices.

There are expectations that the government may push forward some economic reforms which had been stalled over the past four years due to opposition from Left parties, after it won trust vote in parliament on Tuesday, 22 July 2008. Left parities had stalled privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal norms for foreign bank.

A sharp cooling off crude oil which touched record high of $147 per barrel early this month augurs well for the Indian economy. It is currently hovering at about $126 a barrel. Any sharp rebound in oil prices would dampen the sentiment.

Market experts however feel that the market is still cautious and there is a lot of cash on the sidelines. He believes the markets have already tested their bottom last month however, he said that a full-scale bull market is unlikely.

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Weekly Market Update: Starting 14th July 2008

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Market to remain weak and volatile in coming weeks

The market shrugged off decision of Left parties to withdraw their support to the Congress-led United Progressive Alliance government on the hopes this would give government an opportunity to kickstart stalled economic reforms which Left had opposed for four years. However, a surge in crude oil prices, disappointing industrial production data and inflation climbing to more than 13-year high at the end of week played the spoilsport paring earlier gains of the week with the market ending with marginal gains in the week.

Sensex rose 15.85 points or 0.12% to 13,469.86 in the week ended Friday, 11 July 2008. The S&P CNX Nifty edged up 33 points or 0.82% to 4,049 in the week. The BSE Mid-Cap index added 87.10 points or 1.65% to 5,365.34. The BSE Small-Cap index rose 263.99 points or 4.09% to 6,713.66. Foreign institutional investors (FIIs) sold shares worth Rs 1,012.20 crore in the month of July 2008, till 9 July 2008. FIIs sold shares worth Rs 26,477.50 crore in the calendar year 2008. Mutual funds have bought shares worth Rs 712.30 crore in the month of July 2008 so far.

India’s second largest IT exporter by sales Infosys slumped 4.5% to Rs 1676.45 in the week. Infosys’ consolidated net profit as per Indian GAAP rose 4.2% to Rs 1302 crore on 6.8% growth in revenue to Rs 4854 crore in Q1 June 2008 over Q4 March 2008. Infosys has forecast 24.4% to 26.6% growth in earnings per share as per Indian GAAP at between Rs 98.79 to Rs 100.51 in FY 2009 over the year ended March 2008 (FY 2008). It has forecast a between 27.5% to 29.5% growth in revenue at between Rs 21278 crore and Rs. 21622 crore in FY 2009 over FY 2008.

Growth in Index of Industrial Production (IIP) of May has declined at 3.8% as against 10.6% in same period of last year, which is below expectations. May manufacturing growth was also down at 3.9% from 11.3% (YoY) and Capital Goods at 2.5% versus 22.4%.

Inflation based on the wholesale price index rose 11.89% in 12 months to 28 June 2008, above the previous week’s annual rise of 11.63%, government data released on 11 July 2008, afternoon showed. It was at highest level in more than 13 years.

Crude oil has created a major havoc on global bourses. Crude oil for August delivery rose as much as $1.54, or 1.5%, to $143.19 a barrel on Friday 11 July 2008 on the New York Mercantile Exchange as Brazilian oil workers threatened a strike and on concern that Middle East and Nigerian supplies may be disrupted.

Political uncertainty will continue to haunt the bourses. Prime Minister Manmohan Singh is likely to seek a vote of confidence in parliament shortly following Left’s withdrawal of support to the government over the India-US civil nuclear agreement. There was speculation that the government may choose a date around 22 July 2008 to call a special Lok Sabha session for the vote.

Weekly Market Update: 7th July 2008

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The markets ended the volatile week on a high. The indices shrugged off a sluggish start and powered ahead to close with handy gains. Nifty closed at 4,016 up 90 points, while the Sensex shut shop at 13,454 up 360 points.

Volatility is also likely to continue in coming week. In the near term focus may shift to earnings season as IT bellwether Infosys Technologies kickstarts June 2008 quarter earnings season on Friday, 11 July 2008. However tough macro economic environment comprising high inflation, record high global crude oil prices and rising interest rates will continue to weigh on the sentiment in near term.

The market sentiment will also remain under pressure in view of fluid political situation at the Centre after Left, the key ally of the UPA government, hardened its stand on the Indo-US nuclear deal threatening to withdraw support from the government, if it moved ahead to operationalise the deal.

However, market analyst’s feels that selling, which is coming from hedge funds, is tapering off because most of the redemption pressures which are there on them are over as of now. So, there is not too much of selling coming from Foreign Institutional Investors, or FIIs. It is possible to hold around 12,800 levels for the time being and try and inch up to 14,000-14,500. The reason for this is that inflation, to the level of 12.5-13%, is discounted by the market to a certain extent. Secondly, on the political front, things are slowly clearing up and by next week it should be very clear what sort of support is there. Again, India’s monsoon has been 21% above average so far this season. A normal monsoon may lift farm production, which accounts for a fifth of the economy, and cool the nation’s fastest inflation rate in 13 years.

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Market Update: Week Starting 23-06-2008

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Sustained selling by foreign funds, rising inflation, high crude oil prices and political uncertainty will weigh on the sentiment of the investors in the near term. Indian stocks suffered losses for the fourth straight session today to settle at 10-month low on sustained selling pressure throughout the day. Concerns of further policy tightening by the Reserve Bank of India with inflation reaching 13-year high early this month and political uncertainty, weighed on the market sentiment today.

On the political front, in an important political development during the weekend, Uttar Pradesh chief minister Mayawati’s Bahujan Samaj Party (BSP) withdrew its support to the Congress-led UPA government which is unlikely to upset the UPA government’s standing. CPM, a key left party, may pull out support to the Congress-led UPA government at the Centre. Left parties have threatened to pull support to the government if it took further steps on the Indo-US nuclear deal. Meanwhile, the Samajwadi Party, is reportedly in talks with the Congress on extending its support to the Indo-US nuclear deal. The nuclear energy deal appears headed for an imminent showdown that threatens to trigger early elections.

Further rising crude oil remains a major worry as India imports close to 70% of its crude requirements. The oil price has surged about 40% in this calendar year so far. Inflation, has reached the highest level in 13 years early this month. The wholesale price index rose 11.05% in the 12 months to 7 June 2008, government data released on Friday, 20 June 2008, showed. The rate was above market expectation of about 10% rise. The reading was the highest in 13 years since 6 May 1995, when it was 11.11%. The quarterly monetary policy review of RBI is scheduled on 29 July 2008 but it may take a call much earlier with inflation hitting the roof. Reserve Bank of India had on Wednesday, 11 June 2008, hiked repo rate by 25 basis points to 8% with immediate effect in an effort to contain rising inflation. A further hike in rates would impact bottomline of Indian companies. Also high interest rates may delay expansion plans of corporates, which in turn may impact future earnings growth.

However the good news is that the June-September southwest monsoon has been 45% above average so far this season. Rainfall in the four-month rainy season this year will be near-normal, or 99% of the average between 1941 and 1990, the weather office had said in April 2008. The department classifies rainfall as near normal when it’s between 96% and 104% of the 50-year average. Good rains will bolster farm production which in turn may help rein in inflation.

Again advance tax collections till end of last week has risen 27% over the same period last year. Collections till the end of last week were Rs 20,700 crore up 27% from Rs 16,300 crore in the year ago period. Of this, Rs 4,980 crore has come from just 10 corporates, which is a rise of 40% over what they paid a year ago. This is another good news for the market.

But these positive triggers are failing to make any impact in the market and it is witnessing lower levels with sustained selling pressure from FIIs. Foreign institutional investors (FIIs) have pressed heavy sales of Indian stocks this month in the backdrop of a weakening rupee against the dollar. In June 2008, FIIs dumped shares worth Rs 7,125.20 crore (till 18 June 2008). FII outflow in calendar year 2008totaled Rs 22,494.60 crore (till 18 June 2008). On the other hand, mutual funds were net buyers of shares to the tune of Rs 1,919.90 crore in the month of June 2008, till 18 June 2008.

Volatility is expected to remain high in the near term as derivatives contracts for June series are set to expire on Thursday, 26 June 2008.

Indian Stock Market Weekly Update: 16-06-2008

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The market is likely to move in sync with global markets in the coming week. Markets across the globe suffered severe setback in the past few days triggered by spiraling global commodity prices led by crude oil. Selling was seen in metal, realty, power, FMCG and some oil stocks while buying in pharma stocks. Foreign institutional investors (FIIs) have pressed heavy sales in the backdrop of a weakening rupee against the dollar. In June 2008, FIIs dumped shares worth Rs 6,463.20 crore (till 12 June 2008). FII outflow in calendar year 2008 totaled Rs 21,832.60 crore (till 12 June 2008). On the other hand, mutual funds were net buyers of shares to the tune of Rs 894.89 crore in the month of June 2008, till 11 June 2008. India’s economic growth has slowed down as a result of fall in consumer demand caused by rise in interest rates. Industrial output rose 8.1% in 2007/08 (April-March) compared with 11.6% growth in 2006/07.

Fears of Reserve Bank of India (RBI) further hiking interest rates to check soaring mutli-year high inflation, which could choke overall growth of the economy, will continue to haunt investors. Earnings downgrades by brokerages amid rising input and interest costs for India Inc and drying up of global liquidity due to credit crisis remain major concern for the Indian stock market. A further hike in rates would impact bottomline of Indian companies. Also high interest rates may delay expansion plans of corporates, which in turn may impact future earnings growth.

The Indian Meteorological Department (IMD)’s second monsoon forecast for the crucial annual south-west monsoon (June-September) due this month which may indicate spatial rainfall distribution in the main sowing month of July 2008, will be keenly watched by market men. Market men will also watch corporate advance tax payments for the first installment that falls due on 15 June 2008, which will a give a cue on expected Q1 June 2008 numbers from top Indian corporates. The income tax law requires a company to 15% the estimated tax liability for the year as advance tax in the first installment. The advance tax payment by the corporate sector will give a cue on Q1 June 2008 results.

Experts feels that the downside for the markets from here seems quite limited. This is because very clearly at lower levels decent amount of buying coming in. So in fact we may not see the markets going down much more from here. But at the same time at higher levels, you have selling coming in from people who are stuck.