Market may remain volatile; Unitech eyed

The market may remain volatile as was witnessed in previous few trading sessions as traders roll over positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near-month November 2009 contracts on Thursday, 26 November 2009. Asian cues were mixed on Wednesday while US stocks ended marginally in red on Tuesday.

The government can absorb nearly $100 billion of dollars in capital inflows, nearly double what is expected this year, before it needs to take strong restrictive measures, C. Rangarajan, chairman of the Prime Minister's Economic Advisory Council said on Tuesday. Economic growth was picking up, and should hit 7 to 8 % in the fiscal year starting March 2010, he said, adding the biggest worry over the next few months was rising inflation.

Rangarajan said the major economic worry was inflation, which he expected to be around 6.5 % at the end of the fiscal year. He said the the government needed to aim for 4.0 % inflation or less to be compatible with other economies. Any initial curbs would be on speculative funds in sectors such as real estate and borrowing abroad to spend at home he said. The first step was likely to be an increase in the cash reserve ratio for banks, rather than an increase in interest rates, he said. And while monetary policy could be changed, fiscal stimulus would remain in place this fiscal year.

Rangarajan said he expected growth of 7-8 %i n 2009/10, helped by the stimulus. But the government would have to rein in a widening fiscal deficit and withdraw some spending measures. He said he do believe that the process of fiscal consolidation must begin next year.

Brazil and Taiwan have taken steps to curb hot money inflows, and other governments are keeping a watchful eye on inflows, wary that they could fuel asset price bubbles. The IMF's chief economist on Monday warned of bubbles in emerging markets on uncontrolable capital movements, which was echoed by the Asian Development Bank on Tuesday.

President Barack Obama sought to reassure Prime Minister Manmohan Singh on Tuesday of his commitment to boosting U.S. ties with India even as his administration has set its rivals, China and Pakistan, as key priorities. Treating Singh to the first state visit of his presidency, the summit agenda focused heavily on enhancing economic links that have blossomed since India's market reforms in the early 1990s. Obama and Singh told a joint news conference they were committed to completing a 2005 civil nuclear agreement that would open up India's potential $150 billion market in power plants

Among stocks, Unitech will see action as company has repotedly sought approval from the Department of Industrial Policy and Planning and the Reserve Bank of India to raise $700 million through foreign currency convertible bonds.

Astec Lifesciences will be in action as its equity shares are listed on the exchanges today, 25 November 2009. The issue price has fixed at Rs 82 per share.

Asian Markets were trading mixed on Wednesday. The key benchmark indices in China, Hong Kong and South Korea fell by between 0.25% to 0.83%. The key benchmark indices in Indonesia, Japan, Singapore and Taiwan rose by between 0.02% to 0.56%.

Japan's exports fell at the slowest pace in a year in October 2009. Shipments abroad slid 23.2 % from a year earlier in October, compared with a 30.6 % decline in September, the Finance Ministry said today in Tokyo.

Bank of Japan Deputy Governor Hirohide Yamaguchi said on Wednesday that the world economy is recovering after a sharp downturn but has yet to fully emerge from the aftermath of the global financial crisis.

US markets declined but ended off their lows on Tuesday after the Federal Reserve raised its forecast for 2010. Fed minutes indicated that Federal Reserve officials are confident the US economic recovery will be durable, but do not see employment or inflation picking up soon. Earlier, the Dow was down nearly 100 points after a report showed the economy grew less than expected in the third quarter and HP issued a cautious outlook. The Dow was down 17.24 points, or 0.2%, to 10,433.71. The S&P 500 index slipped 0.59 points, or 0.1%, to 1,105.65, while the Nasdaq composite index fell 6.83 points, or 0.3%, to 2,169.18.

In US economic news, Q3 GDP was revised to a 2.8% growth rate, lower than the initial reading of 3.5%. In other data, the conference board's gauge of consumer confidence rose to 49.5 in November 2009 from 48.7 in October 2009. And home prices improved for a fifth straight month in September 2009.

Swift interest rate hikes aimed at containing inflation in product and asset prices could cause another downturn in the slowly recovering economies of the United States and Europe, the head of the World Bank Robert Zoellick said.

Back home, volatility was the order of the day on Tuesday as the key benchmark indices swung between positive and negative zone. Market snapped last two days' gains as a sharp slide in Chinese stocks and weak European markets weighed on investor sentiment. The BSE 30-share Sensex fell 49.10 points or 0.29% to 17131.08 on that day.

As per provisional data on NSE, foreign funds bought shares worth Rs 169.69 crore and domestic funds sold shares worth Rs 146.83 crore on Tuesday.