The market drifted lower today in what was a broad-based correction. The undertone was cautious due to rising domestic interest rates, and also due to concerns that the short-term capital gains tax may be hiked in the Union Budget 2007-08, which will be tabled in Parliament on 28 February 2007. Caution was also partly due to worries of a possible interest rate hike by the Bank of Japan.

The 30-share BSE Sensex lost 149.52 points (1%), to 14,253.38. The S&P; CNX Nifty lost 57.60 points (1.3%), to 4,106.95.

The market-breadth was quite weak. For 1,908 shares that declined on BSE, 707 rose. Just 58 shares were unchanged. Losers outpaced gainers by a ratio of 2.69:1.

While the BSE Small-Cap index shed 102.20 points (1.4%) to 7,214.73, the BSE Mid-Cap index lost 73.05 points (1.2%) to 5,877.90.

Nifty February futures were at 4,115.55, compared to the spot Nifty closing of 4,106.95. Nifty March futures were at 4,115 compared to the spot Nifty closing of 4,106.95. The turnover on NSEs derivatives segment surged to Rs 39,292 crore from Mondays Rs 32,491 crore.

February 2007 derivatives contracts expire this Thursday (22 February). The rollover in Nifty contracts, till end of Mondays trading, was 36%. The overall rollover in individual stock futures was about 25%. The rollover was strong, at 50 - 60%, in Reliance Petroleum, Satyam Computers, Balrampur Chini Mills and Bajaj Hindustan.

The cash segment turnover on BSE dropped to Rs 3873 crore, from Mondays Rs 4217 crore.

All sectoral indices of BSE ended in the red today. The BSE Auto index lost 84.05 points (1.5%), to settle at 5,537.42. BSEs banking sector index, the Bankex, shed 102.86 points (1.41%), to settle at 7,186.24. The BSE Capital Goods index shed 142.69 points (1.48%), to 9,503.10. The BSE Oil & Gas index shed 49.98 points (0.7%), to finish at 6,683.43.

The Sensex is up 3.3% in calendar 2007 so far. It is down 2.7% from the lifetime closing high (14,652.09) of 8 February 2007.

State-run State Bank of India (SBI) today joined some other state-run banks in raising the benchmark prime lending rate (PLR). Interest rates on working capital loans are linked to PLR. Any rise in PLR increases borrowing cost of working capital loans for corporates. Last week three state turn banks Bank of India, Bank of Baroda and Punjab National Bank raised their prime lending rate by 50 basis points each following a hike in cash reserve ratio by RBI on 13 February 2007.

Following the announcement, SBI shares dropped 2.4% today to Rs 1103.15. ICICI Bank shed 0.7% to Rs 971, while HDFC Bank lost 0.7% to Rs 1025.35.

Housing finance major HDFC lost 2.4% to Rs 1651, on concerns that rising interest rates may impact demand for housing loans.

Oil exploration major, ONGC, dropped 3.5% to Rs 873, following reports that the Directorate General of Hydrocarbons (DGH) had disallowed gas discovery in the Krishna-Godavari basin. ONGC is likely to contest DGH views, reports suggest.

Cement shares edged lower on market talk that the government may impose a ban on exports in the budget to check cement prices. Grasim lost 3% to Rs 2565, and Gujarat Ambuja Cements shed 2.2% to Rs 129.50.

FMCG major Hindustan Lever (HLL) lost 2.5% to Rs 199.80 amid post-results' volatility. The stock had weakened to Rs 200.70 by 12:04 IST ahead of the results, which hit the market in afternoon trade. HLL had firmed up to a high of Rs 207.85 by 13:43 IST. As many as 26.8 lakh shares changed hands in the counter on BSE. HLLs net profit declined 1.9% in the December 2006 quarter to Rs 511 crore from Rs 521 crore in the December 2005 quarter.

Telecom shares edged lower. Reliance Communications shed 2.3% to Rs 452.10, and Bharti Airtel shed 1.1% to Rs 788.10.

Reliance Industries (RIL) dropped 0.3% to Rs 1412.85. The stock weakened in the latter part of trading. It rose as much as 1.8%, to a high of Rs 1444.80, by 13:32 IST. This is a new all-time high for the stock. In intra-day trade, RILs market-cap crossed Rs 2,00,000 crore today. At end of the trading session, RILs market cap was Rs 1,97,118.96 crore.

As per reports, global oil major, Chevron Corporation, may assist RIL in developing an exploration block in the fertile Krishna-Godavari (KG) basin.

Auto shares drifted lower. Maruti Udyog lost 2% to Rs 895.20. The stock had surged in the last couple of days after the cut in retail prices of petrol and diesel. While Tata Motors lost 1.6% to Rs 854, Bajaj Auto dropped 1.1% to Rs 2991.

State-run crude oil refiner, HPCL, rose 1.6% to Rs 286.55 on reports of Mittal Investments having picked up 49% stake in HPCLs new refinery under construction in Punjab. The refinery at Bathinda will have an annual capacity of 180,000 barrels per day.

Real estate developers barring Unitech dropped. Parsvnath Developers dropped 5.5% to Rs 312.20, Akruti Nirman shed 5% to Rs 423.50, Sobha Developers lost 4% to Rs 795, and Mahindra Gesco Developers shed 2.6% to Rs 602. Unitech surged 4.5% to Rs 421.80.

Sesa Goa rose 1.6% to Rs 1934, following reports that mining giant Anglo American had joined the race to bid for Japan's Mitsui & Co's 51% stake in the Indian iron ore exporter. Other companies reported to be in the fray for Mitsui's stake are Arcelor-Mittal, Australia's Rio Tinto, London-listed Vedanta Resources, Australia's BHP Billiton and Aditya Birla Group.

Tata Tea lost 1.4% to Rs 663.30. The company said on Monday it will offload 80% stake in its North India Plantation Operations (NIPO) to a group of investors and employees. Amalgamated Plantations, the company to which the Tatas will transfer its NIPO business, covers Tata Teas 20 plantations in Assam and five in Dooars (West Bengal), spread over 24,000 hectares.

A key trigger for the market in the near-term is Union Budget 2007-08. Concerns that the government may raise short-term capital gains tax on sale of shares from the current 10% have gained currency. The securities transaction tax (STT) may also go up further. The previous budget had increased STT. The removal of a 10% corporate surcharge may be offset by removal of certain open-ended exemptions.

Market men also expect the finance ministry to give a big impetus to agriculture and infrastructure in the budget.

The immediate trigger for global markets is the Bank of Japans two-day policy meeting ending on Wednesday (21 February 2007). Analysts are divided over whether it will lift rates to a decade-high of 0.5% from 0.25% currently. Hedge funds, who benefited from low rates in Japan, may resort to cutting of positions in global assets including equities following any rate hike, or a signal of a rate hike.

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