Market may snap last six days of gains on weak global cues

The key benchmark indices may fall on profit taking after last six days of gains tracking weak global cues. However, revival in India's annual monsoon and good industrial output data may cap fall.

Asian stocks fell today after the dollar fell to a fresh seven-month low against the yen helped by talk of Japanese fund repatriation and the view that it is replacing the yen as the funding currency for carry trades. The key benchmark indices in HongKong, Japan, South Korea, Singapore and Taiwan fell by between 0.65% to 2.47%. But, China's Shanghai Composite rose 0.14%.

The US markets snapped a five-day winning streak on Friday on profit-taking offset an improvement in consumer confidence. The Dow Jones was down 22.07 points, or 0.2%, to 9,605.41. The S&P 500 index fell 1.41 points, or 0.1%, to 1,042.73, and the Nasdaq Composite Index fell 3.12 points, or 0.2%, to 2,080.90.

The markets shrugged off an improvement in consumers' outlook. The university of Michigan-Reuters gauge of consumer sentiment jumped higher than expected to 70.2 in a mid-September reading against a final August reading of 65.7. Their outlook for the next year was the highest since September 2007.

Among other economic data, wholesale inventories fell 1.4% to their lowest level in nearly three years in July and import prices spiked 2% last month.

Back home, the weather office said on Thursday, 10 September 2009 rainfall was 21 % above average in the week to 9 September 2009 continuing the upturn since mid-August but total seasonal rainfall was a fifth short of normal since the season began with the driest June in eight decades. More than two-thirds of the people live in villages and 60 % of the farm land depends on the annual rains. Higher rainfall in the past week has helped India's 81 biggest reservoirs fill up much faster than normal for this time of year. Reservoirs are important for hydropower, which accounts for a quarter of India's generation capacity. They also provide water to irrigate winter crops.

However, India's drought has spread to nearly half its more than 600 districts, particularly in sugar-producing areas, but the government said its grain stocks were bigger than last year and sugarcane output would not fall. Finance Minister Pranab Mukherjee said the country had enough grains to face the drought but there was a shortfall in lentils and edible oils.

The wholesale price index (WPI) fell 0.12% in the year through 29 August 2009, lower than an annual decline of 0.21% in the previous week, data released by the government showed on Thursday. The food article index surged 14.8%.

Analysts are concerned that a sharp surge in food prices in the past few days due to scanty rains may stoke inflationary pressures in the economy. Interest rates could rise on higher inflation which in turn may impact a nascent economic recovery and corporate profits.

Meanwhile, India's industrial output data for the month of July 2009 showed growth of 6.8% compared with 6.9% growth in the same month last year data showed on Friday 11 September 2009. The industrial output for the month of June 2009 revised higher to 8.2%.

The BSE 30-share Sensex rose 47.44 points or 0.29% to 16,264.30 on Friday.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 228.77 crore while domestic funds sold shares worth Rs 294.20 crore on Friday.

The Sensex has jumped 865.97 points or 5.62% in six trading days to 16,264.30 on 11 September 2009 from a recent low of 15,398.33 on 3 September 2009 as a revival of monsoon rains, strong response to the initial public offer of Oil India and firm global stocks boosted sentiments.