Market seen snapping six-day losses

The market may snap its six-day declining trend mirroring positive Asian indices. US stocks ended on a mixed note on 3 November 2009. The S&P CNX Nifty futures were trading 75.5 points higher in Singapore. The outcome of the Supreme Court's hearing on the long-standing gas dispute case between the Ambani brothers will also influence the market.

Mukesh Ambani led Reliance Industries (RIL) and Anil Ambani led Reliance Natural Resources (RNRL) will see action as a hearing of the gas dispute involving the Ambani brothers resumes today, 4 November 2009, after a break since last week.

In the previous hearing on 27 October 2009, the Supreme Court had observed that gas is a national resource owned by the Government and, therefore, subject to Government policy. The Court also asked why the brothers cannot settle the matter through arbitration or mutual consensus. The two brothers are fighting a legal battle in the apex court over division of natural gas produced by RIL from KG-D6.

Asian markets were trading higher today, 4 November 2009 led by banks and mining companies, as Korea Exchange Bank reported better-than-estimated profit and gold prices climbed to a record. Key benchmark indices in China, Japan, Hong Kong, Singapore, South Korea, and Taiwan were up by between 0.13% and 1.78%.

US markets ended on a mixed note on Tuesday, 3November 2009 as technology stocks struggled after a downgrade on Intel. The Dow Jones industrial average was down 17.53 points, or 0.18%, to 9,771.91. However the S&P 500 index added 2.53 points, or 0.24%, to 1,045.41 and the Nasdaq Composite index rose 8.12 points, or 0.4%, to 2,057.32.

It is widely expected that the US Federal Reserve at a regular two-day policy meeting on 3-4 November 2009 will hold interest rates at their lowest-ever range of 0% to 0.25%, where they stood since December 2008. However, there's plenty of unease about the contents of the Fed's accompanying policy statement. A section of the market sees the Fed altering its statement to a less dovish tone. There is speculation that the Fed might drop or alter its pledge to keep rates low for an extended period.

Financial markets are also looking for clues from other central banks about when stimulative policy may have to come to an end. The European Central Bank (ECB) meets on Thursday, 5 November 2009. No rate change is expected and few expect it to offer clues on when it might change tack. The Bank of England (BOE) meets the same day and the market is waiting to see if it tops up its quantitative easing programme after the economy unexpectedly contracted between July-September 2009 period.

Governments and central banks around the world have injected trillions of dollars in the past year or so to pull the world out of a most severe recession since the 1930s Great Depression.

Australia's central bank on Tuesday raised its key policy rate for a second month in a row, hiking it by a quarter of a percentage point to 3.50%, as expected. The Reserve Bank of Australia also hinted at further rate hikes in the future, with Governor Glenn Stevens saying in a statement that, although inflation should continue to moderate in the near term, it will "probably not" fall as far as earlier thought.

Back home, key benchmark indices extended losses for sixth straight session of trade on 3 November 2009 as sell-off gripped index pivotals in late trade. The BSE 30-share Sensex slumped 491.34 points or 3.09% to 15,404.94, its lowest closing since 3 September 2009 and the S&P CNX Nifty slipped 147.80 points or 3.14% to 4,563.90, its lowest closing since 21 August 2009

The BSE Sensex has shed 1405.87 points or 8.36% in six trading days from 16,810.81 on 23 October 2009. From a 17-month closing high of 17,326.01 on 17 October 2009, the Sensex has lost 1921.07 points or 11.08%. Yet, the barometer index is up 5757.63 points or 59.68% in calendar year 2009, as on 3 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 7244.54 points or 88.77%, as on 3 November 2009. FII inflow in October 2009 totaled Rs 8303.80 crore, till 30 October 2009. Their inflow amounted to Rs 68,441.10 crore in the calendar year 2009.

As per provisional data, foreign funds sold stocks worth a net Rs 874.26 crore on 3 November 2009 whereas domestic funds bought equities worth a net Rs 751.95 crore.

A report prepared by ministry of finance indicated that the economy is showing a distinct sign of pickup, although uncertainty related to the poor summer monsoon and the global economic outlook remain. The economic growth slowed to 6.7% in the fiscal year through March 2009 after three straight years of at least 9%, and government officials have said growth in the current year is on track for roughly 6.5%.

Finance Minister Pranab Mukherjee said on Tuesday that the government has to continue with its fiscal stimulus and is confident of attaining it medium-term fiscal targets. He said non-farm credit growth remained an area of concern and said banks have been told to enhance credit growth.

A news agency on 3 November 2009, quoted G. Bhujabal, economic advisor in the Ministry of Commerce and Industry as saying that he expects declining trend of exports reversing by December 2009 or January 2010. Exports declined 13.8% in September 2009 to $13.6 billion. Exports fell 28.5% in the April-September 2009 period to $77.9 billion.

Automobile sales rose 29.89% to 154,476 units in October 2009 over October 2008 as softened lending rates and attractive benefits offered by companies pushed the aggregate sales of the industry.

The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian companies, fell to 54.5 in October 2009 from 55 in September 2009. A reading above 50 means activity expanded during the month. Growth in domestic new orders may be beginning to suffer from the impact of a drought, but stronger foreign demand was helping to cushion the blow, HSBC senior Asian economist Robert Prior-Wandesforde said.

The Reserve Bank of India at its monetary policy review, last week, left its key rates unchanged, but raised the wholesale price-based inflation projection for end-March 2010 sharply to 6.5% with an upward bias, from 5 % earlier.

The IMF said on 29 October 2009 the economies of India, China and Australia were recovering especially rapidly, suggesting it notices growing pressures for authorities there to tighten monetary policy ahead of others in the region. It called the three economies special cases, while adding a tightening of monetary policy seemed unnecessary elsewhere in the region in the near future.

It also advised Asian central banks not to raise interest rates only to calm asset price growth, saying lifting rates ahead of advanced economies could attract "carry trade-type" capital inflows and aggravate asset price pressures.

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.

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 recently 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.

The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on 21 October 2009. The Government of India owns nearly 86% of Sail. Also the government gave its approval for 15% follow on public offer for Rural Electrification Corporation on 29 October 2009.