Market may fall on weak Asia; inflation eyed

The market may extend last two days fall on weak Asia. Investors will keenly watch inflation data for the week ended 10 October 2009 to be announced by the government today. Inflation for the week ended 3 October 2009 rose 0.92% compared to 0.70% in the previous week.

The Prime Minister's economic advisory council said on Wednesday that it sees inflation at around 6 percent by the end of the current fiscal year to March 2010

Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August at 10.4 %.

The RBI pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. While as exit from the loose monetary policy is imminent, speculation on the bourses is the timing of the exit policy. The RBI is expected to keep its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on 27 October 2009.

Meanwhile, energy major Reliance Industries will conclude initial arguments before the Supreme Court in a gas-pricing dispute with Reliance Natural Resources by 29 October 2009, a lawyer for the firm said.

Mukesh Ambani-controlled Reliance Industries, India's top conglomerate, is fighting with Reliance Natural Resources, led by younger brother Anil Ambani, over the terms of a deal to sell gas to Reliance Natural at below the price set by the government. Reliance Industries has been presenting initial arguments in the case before India's Supreme Court since Tuesday, saying the private deal between the Ambani brothers is not binding on the company, and it can sell the gas only at the government-approved price.

Reliance Industries would finish its initial arguments by next Wednesday or Thursday, company lawyer Harish Salve said.

India's largest engineering and construction firm by sales Larsen & Toubro unveils Q2 September 2009 results on Thursday, 22 October 2009. Strong project execution is seen driving growth in L&T's top line and bottom line in Q2 September 2009. A total of five brokerages expect a between 19% to 42.3% growth in L&T's net profit at between 546.30 crore to Rs 654.70 crore in Q2 September 2009 over Q2 September 2008.

Hero Honda Motors may see action after its net profit rose 95% to Rs 597.14 crore on 26.7% rise in sales to Rs 4040.10 crore in Q2 September 2009 over Q2 September 2008. The company announced result after market hours on Wednesday.

Jaiprakash Associates will be in action after its net profit rose 327.9% to Rs 870.19 crore on 53% rise in sales to Rs 1824.26 crore in Q2 September 2009 over Q2 September 2008. The company announced result after market hours on Wednesday. The company also announced 1:2 bonus issue.

Piramal Healthcare, Biocon, Allahabad Bank, Action Construction, Adlabs, Asian Oilfield, Asian Paints, Bhushan Steel, Binani Cement, Cambridge Solutions, Coromandel Fertilisers, DCM Shriram Consolidated, Fag Bearings, Globus Spirits, Hanung Toys, Henkel India, Hikal, Hindustan Organic, Hindustan Zinc, ICI India, Info Edge, JSW Holdings, Jubilant Organosys, Kale Consultants, Kirloskar Brothers, Mount Everest Mineral, Noida Toll Bridge, Rain Commodities, Rama Newsprint, Rane Brake, Raymond, Rolta India, Spice Comm, Sunflag Iron, Tata Coffee, Unichem, Vimta Labs, among others will announce their Q2 September 2009 result today.

Stock and sector-specific activity may dominate trade on the bourses in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.

Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.

Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.

Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.

Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.

Asian stocks fell today as concern about rising loan losses at banks fueled speculation that an equity rally since March had outpaced earnings prospects. The key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan fell by between 0.23% to 1.54%.

Japan's Nikkei 225 Stock Average slumped 1.2 % as a government report showed the country's exports slumped 30.7 % in September 2009 over September 2008.

China's Shanghai Composite Index fell 0.8% following economic data released this morning. China's gross domestic product grew 8.9 % in the third quarter ended September 2009 from a year earlier.

US markets finished lower on Wednesday on profit taking despite strong earnings from Morgan Stanley The Dow Jones industrial average fell 92.12 points, or 0.9%, to 9,949.36. The S&P 500 index was down 9.66 points, or 0.9%, to 1,081.40. The Nasdaq Composite index slipped 12.74 points, or 0.6%, to 2,150.73.

In earnings from the US, Morgan Stanley reported better-than expected quarterly profit on strong fixed income sales and trading revenue.

The key benchmark indices slumped on weak global stocks and lower US index futures on Wednesday. The BSE 30-share Sensex fell 213.84 points or 1.24% to 17,009.17 on that day.

As per provisional data, foreign funds on 21 October 2009, dumped stocks worth a net Rs 511.81 crore. Domestic funds offloaded stocks worth a net Rs 290.91 crore.

The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary equity market. As per reports, Indian firms have garnered about $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April 2009. Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year.

Most of these companies - from industries ranging from liquor and spirits to infotech - issued equity shares to a select group of investors by way of qualified institutional placement or QIP. If the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million).

Unlisted Reliance Infratel announced on 22 September 2009 its intention to raise Rs 5,000 crore from the primary market. Divestment of state-run firms by the government may also increase the supply of paper in the market.

The government on Monday approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On Friday, 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.

The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on Wednesday, 21 October 2009. The Government of India owns nearly 86% of Sail.