The market is likely to extend this weeks gains tracking firm Asian markets. However, volatility may remain high ahead of expiry of February 2008 derivatives contracts on Thursday, 28 February 2008. Traders and institutions are unlikey to take large positions ahead of the Union Budget 2008-09 due on Friday, 29 February 2008.

At the end of Tuesday (26 February 2008)s trading, Nifty saw rollover of 54% to March 2008 contracts from February 2008 contracts. The market wide rollover stood at 53% to 55%.

On Tuesday, 26 Februray 2008, the market extended Monday (25 February 2008)'s gains after Railway Minister Lalu Prasad Yadav provided thrust on modernising rail infrastructure in Railway Budget 2008-09 which he presented to parliament on that day. The 30-share BSE Sensex rose 155.62 points or 0.88% at 17,806.19. Keeping the common man in mind, the railway minister also cut passenger fares, with parliamentary elections due in 2009. Firm global markets also helped support domestic bourses.

As per provisional data, FIIs sold shares worth a net Rs 31.99 crore on Tuesday, 26 February 2008. Domestic funds bought shares worth a net Rs 511.33 crore on that day.

FIIs were net buyers to the tune of Rs 1,193.21 crore in the futures & options segment on Tuesday. FIIs were net buyers of index futures to the tune of Rs 646.57 crore and bought index options worth Rs 325.76 crore. They were net buyers of stock futures to the tune of Rs 225.79 crore and sold stock options worth Rs 4.91 crore.

The next major trigger for the market is the Union Budget 2008-09. With general elections due in 2009, Union Budget 2008-09 to be presented on 29 February 2008 will be the last full-fledged budget of the Congress-led United Progressive Alliance government and it is therefore likely to be a populist budget. Thus, the Finance Minister (FM) is likely to provide higher allocations to several social initiatives like rural upliftment, employment, education, agricultural growth and public health.

Though populist measures will dominate the budget, FM is also expected to take steps to stimulate investment and consumption demand at a time when the economy is witnessing moderation from a solid growth last year. A reduction in personal income tax, if any, will result in increase in disposable incomes which in turn may boost demand for consumer goods.

Expectations are that the corporate income tax rate may be cut or the 10% surcharge on corporate tax may be abolished. The surcharge is 10% on a tax rate of 30%, making the effective corporate tax rate 33%. Another possibility is that of a cut in dividend distribution tax from 15% to 12.5%. Meanwhile, FM may raise the Securities Transaction Tax slightly.

It is also expected that the FM would announce some relief packages for troubled export sensitive sectors like textiles, rubber, jewelry, leather and IT services. These sectors have been hit by rupees surge in the past one year.

Asian stocks surged today after weak US economic data and comments from a Federal Reserve official signalled that US interest rates will continue to head lower. Key benchmark indices in Hong Kong, China, Japan, South Korea, Singapore and Taiwan were up by between 0.96% to 3%. Fed Vice Chairman Donald Kohn said on Tuesday that a weak US economy was a bigger worry than higher inflation risks.

US stocks rose for a third day on Tuesday as technology companies gained on IBM's plans to buy back $15 billion of its shares and the energy sector advanced on a record high close for oil in New York. The Dow Jones industrial average was up 114.70 points, or 0.91%, at 12,684.92. The Standard & Poor's 500 Index was up 9.49 points, or 0.69%, at 1,381.29. The Nasdaq Composite Index was up 17.51 points, or 0.75%, at 2,344.99.

On the New York Mercantile Exchange, April 2008 crude settled at a record $100.88 a barrel, up $1.65, on Tuesday.

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