Jayanta Mallick

THIS week, global financial and commodities markets are likely to feel the aftershocks of the two powerful blows from the People's Bank of China and Osama bin Laden's video tape. The impact could be much more pronounced than the crude oil shock witnessed in the previous week.

The markets could not fully assess and factor in the implication of the quakes that struck successively late on the week-end. The short-term market outlook again turned negative after the Chinese central bank effected a 27-basis point rise in one-year lending and deposit rates.

The market responded with a knee-jerk reaction to the Beijing blow on Friday, but the first reaction to Osama's threat would only be felt on Monday.

Thanks to RBI's sensible handling of the interest rate issue, around 8 per cent decline in global crude prices and good numbers dished out by the domestic corporates, the Dalal Street indices managed to close the week with marginal gains, which were obviously not enough to the change the technical position on the charts.

The last week's positive blip was aided by a record liquidity splurge. The mutual funds, after a long while turned net buyers. FIIs made a record net investment on Friday at Rs 916.20 crore, highest in October. They made a combined net investment of Rs 984.80 crore.

The Senesex and the Nifty moved up by 31 and 7.15 points, respectively. The BSE-IT and health sector indices fared better than other sectoral averages.

However, market breadth indicator did not send a positive signal. The emerging uncertainties are likely to loom large over the next few sessions.

Though the Indian Government decided to insulate the economy by not hiking domestic petrol, diesel and LPG prices, the Osama factor, this week, may extract risk premium from the international crude oil market.

The reprieve on the global crude price may prove temporary also because the US petroleum inventories (as on October 4) were not in great shape. Though the gasoline stock was in the positive territory (1 per cent up from five-year average), crude and heating oil stood at 4 and 18 per cent below the five-year averages. Considering the US economic compulsion, the chances of releasing strategic oil reserves, according to oil analysts, also seem remote this winter. The Beijing's move, on the other hand, is likely to depress the local metal stocks as most of manufacturers/exporters were enjoying the China-driven premiums in the international markets.

The Tata Steel stock may attract some short covering in early trades on Monday as its results came after the Friday's close. A section of the market players may also speculate on the prospect of metal and cement producers as an oil price fuelled construction boom is underway in the Persian Gulf region. However, these may not be enough to sustain the price line.

The open interest for the November derivatives contracts at Rs 9,816 crore, because of substantial rollover from the October series, will tend to make the market cautious. Disturbing international or national news may send operators and investors scurrying for cover.

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