Market may slip tracking weak global cues

The key benchmark indices may slip tracking weak Asia and fall in US stocks on Wednesday. Profit taking may not be ruled out after the recent surge in indices. The government will announce India's wholesale price index (WPI) in the 12 months to 25 July 2009 today. Inflation had declined 1.54% in the 12 months to 18 July 2009, as compared with previous week's annual decline of 1.17%. With no near term domestic triggers investors will closely follow global developments for further cues.

Heavy purchases by foreign funds triggered a solid rally on the bourses this year. The Sensex was up 6256.52 points or 64.85% in calendar year 2009 as on 5 August 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex was up 7743.43 points or 94.89% as on 5 August 2009.

Foreign institutional investors (FIIs) inflow in calendar year 2009 totaled Rs 36,841.10 crore (till 4 August 2009). As per provisional figures on NSE, foreign funds sold shares worth Rs 690.53 crore and domestic funds sold shares worth Rs 23.90 crore on Wednesday, 5 August 2009.

There are signs that the Indian economy is recovering from a slowdown last year. Growth in India's manufacturing activity held steady in July 2009 amid robust local demand and a slight rebound in exports. However, intense competition curbed companies' pricing power even as raw material costs jumped, a survey released during trading hours on Monday, 3 August 2009, showed. The Markit Purchasing Managers' Index (PMI), based on a survey of 500 companies, was at 55.30 in July 2009, little changed from 55.34 in June 2009. It has been above the threshold of 50 -- which separates expansion from contraction -- for four straight months. The new orders index rose to 59.75, its highest in nine months, from 58.56 in June 2009.

The Q1 June 2009 results of India Inc were encouraging, with lower costs helping bottomline growth. The combined net profit of 3,004 companies rose 17% to Rs 73677 crore on 5% fall in sales to Rs 721948 crore in Q1 June 2009 over Q1 June 2008.

A weak monsoon remains a cause of concern though. India's monsoon rains were 18% below normal in the week to 29 July 2009, having been above normal in the preceding two weeks. Total rainfall since the beginning of June was 19% below average, the India Meteorological Department said on 30 July 2009. On the flip side, water levels in India's 81 main reservoirs rose to 35% of capacity in the week to 30 July 2009, up from 23% a week earlier and 31% a year ago, government data showed. More than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

Most Asian stocks fell today as Nikon Corp. forecast a record loss and some investors speculated China's central bank may rein in lending. The key benchmark indices in China, Hong Kong, South Korea, Singapore and Taiwan fell by between 0.44% to 3.11%. Japan's Nikkei rose 0.92%.

The US markets ended lower on Wednesday, 5 August 2009. Disappointing readings on the service sector and employment situation dragged the markets down.

The Dow fell 39.22 points, or 0.4%, to 9,280.97. The S&P 500 Index fell 2.93 points, or 0.3%, to 1,002.72, while the Nasdaq Composite Index fell 18.26 points, or 0.9, to 1,993.05.

In economic data. The ISM services index for July 2009 unexpectedly slipped to 46.4 from 47 in June 2009. The latest ADP employment report indicated that 3.71 lakh jobs were slashed in July. This came after the challenger report stated that planned job cuts jumped 31% last month. Meanwhile job loss estimates for June were revised lower to reflect 4.63 lakh job cuts. Only positive indicator being that the factory orders unexpectedly rose 0.4% in June 2009.