Markets likely to extend losses: Analysts

Mumbai, June 10 (UNI) Market analysts feel that despite the inflationary heat cooling off and growth continues to be robust at more than nine per cent, the market is likely to extend losses next week as investors might choose to play it safe and lock in profits after turbulence in global markets and in preparation for some large equity issues.

The Bombay Stock Exchange (BSE) 30-scrip Sensitive Index had wrapped up the week with a loss of a massive 3.48 per cent or 506.94 points from the previous week close of 14,063.81 points, while the National Stock Exchange (NSE) 50-stock Nifty Index tanked by 152 points or 3.66 per cent as it plunged to 4,145 points.

Market analysts pointed out that the only good news for the forthcoming week starting tomorrow is that of a taming inflation. For the first time in 10 months, inflation, measured by wholesale price index, fell below 5 per cent at 4.85 per cent during the week ended May 26, compared to 5.06 per cent in the previous week mainly on account of cheaper food products. This development is the only positive trigger for the bourses tomorrow, they opined.

Traders said that the response to the DLF initial public offering (IPO), which opens next week, may dictate the trend to a significant extent as it is a large IPO and domestic bourses are also likely to follow global market trends.

Asian stock markets are likely to be on the defensive in the week ahead as investors keep a close eye on global bond yields, which have risen sharply on fears that interest rates around the world are heading higher. Loftier yields make bonds attractive relative to stocks and also lift long-term borrowing costs for companies, factors that could prompt stock investors to lock in some of the rally that has driven many Asian markets to record highs.

Over the next few months, the progress of the July-September monsoon will hold key regarding the direction the markets and the overall economy would take, analysts observed. The weather office had earlier said in April, that this year's monsoon was likely to be 95 per cent of the long-term average, with a 5 per cent margin of error. The annual monsoon is vital for India's economic health as it is the main source of water for agriculture, which generates more than a fifth of the gross domestic product, they noted.

Realty major DLF is mopping up between Rs 8,750 crore and Rs 9,625 crore at the proposed price band of Rs 500-Rs 550 per share.

DLF IPO opens for subscription tomorrow and ends on Thursday.

Besides, ICICI Bank had also earlier on May 15 this year, filed a draft prospectus with capital market regulator Securities and Exchange Board of India (SEBI) to seek approval for raising Rs 17,500 crore through an equity issue in the domestic and overseas market.

Market pundits explained that there are some supportive factors for the market as well. A fall in the rupee from nine-year highs against the dollar last month has sparked interest in export-oriented outsourcing firms, which have been under pressure due to concerns that their profits would be hit by the currency strength.

Shree Ashtavinayak Cine Vision, Hercules Hoists, Veejay Lakshmi Engineering Works, Precision Wires India and Glenmark Pharma will unveil their fourth quaterly (Q4 March 2007) results tomorrow. The board of Glenmark will also consider stock split proposal along with these results.

The following day on Tuesday, RPG Life Science and Berger Paints are slated to unveil Q4 results. The next day Wyeth, Bimetal Bearings and EIH Associated Hotels will unveil their Q4 numbers.

Besides, Hind Rectifiers and LG Balakrishnan&Bros will unveil Q4 results on Thursday, while Shipping Corporation of India, Royal Orchid Hotels, EIH, and Elecon Engineering Company will unveil Q4 results on Friday. The board of Elecon Engineering will also consider bonus issue proposal along with their Q4 results.

Meanwhile, the Q1 June 2007 corporate earnings season will kickstart from about a month from now and, over the next few days, traders are likely to build positions based on Q1 results expectations. The Q4 corporate earnings were strong which had helped trigger a solid surge in domestic bourses since early April, this year.

UNI