Market may fall on weak Asia; inflation data eyed

The market may open lower tracking weak Asian stocks. Investors will keenly watch the inflation data for the month of November 2009 due to be announced by the government today. The annual rate of inflation, based on monthly wholesale price index (WPI), stood at 1.34 % for the month of October 2009 over October 2008.

A finance ministry official said on Friday 11 December 2009 the government was taking steps to moderate the rise in food prices, a day after data showed the food price index whish is released weekly jumped an annual 19.05 % on 28 November 2009.

The Reserve Bank of India has said it needs to strike a balance between growth and inflation, but has also noted most inflation pressures are coming from food supply shortages, where monetary policy is not an effective tool. Governor Duvvuri Subbarao has said the danger was that food price inflation , running at an annual 19.05 % at end-November, spilt over into broader inflation expectations.

Industrial output jumped 10.3% in October 2009 from a year earlier, helped by stimulus measures and robust domestic demand, data released by the government on Friday showed. Manufacturing production rose 11.1% in October 2009 from a decline of 0.6% a year earlier. September's annual industrial growth rate was revised upward to 9.6% from 9.1% previously. Industrial output rose 2.6% in the 2008/09 fiscal year (April-March), slower than 8.5% in 2007/08.

Investors fear that a recovery in the economy and a likely surge in wholesale price inflation will add pressure on the central bank to raise interest rates. The Reserve Bank of India holds a quarterly policy review in late January 2010.

Indian corporates that have borrowed aggressively through investment arms and holding firms to fuel growth will soon run into a speed breaker. The Reserve Bank of India, reportedly will come out with a new rule for such investment companies that are largely outside the regulator's radar. The central bank's concern stems from the disproportionately high fund-raising by these companies with shallow capital base.

The disinvestment programme is reportedly set to enter an ambitious phase in the next financial year with the Department of Disinvestment planning to seek Cabinet approval for a host of companies from January 2010. The Cabinet has so far followed a cautious approach in approving disinvestment in companies, though it has simultaneously come out with a broad policy direction for the programme. Based on the policy, the disinvestment department has prepared a list of up to 30 companies that can be considered for disinvestment

Meanwhile, DB Corp, India's second largest regional newspaper, was subscribed 2.02 times on the first day of issue on Friday 11 December 2009. The company has set a price band of Rs 185-212 a share.

Mumbai based realty firm Godrej Properties' initial public offering (IPO) was subscribed 4 times on last day of the issue on 11 December 2009. The price band is at Rs 490-530 per share.

Asian stocks fell on Monday led by banks and commodity producers, as a measure of Japanese business confidence showed companies are scaling back their investment plans and oil prices dropped. The key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by between 0.11% to 2.08%.

The Dow and S&P 500 rose on Friday 11 December 2009 after stronger-than-expected retail sales and consumer sentiment data reinforced investor confidence in a steady economic recovery. The Dow Jones industrial average rose 65.67 points, or 0.63%, to 10471.5. The Standard & Poor's 500 Index added 4.06 points, or 0.37%, to 1106.41. The Nasdaq Composite Index down 0.55 points, or 0.03%, to 2190.31.

Senior White House economists on Sunday predicted the U.S. economy will start creating jobs by spring and said that boosting employment will be at the top of President Barack Obama's agenda next year.

Back home, the key benchmark indices ended a choppy trading session lower on Friday 11 December 2009 as industrial production growth for October 2009 only matched estimates while market participants had hoped for a big surprise. The BSE Sensex fell 70.28 points or 0.41% to 17,119.03 on that day.

As per provisional figures on NSE, the foreign funds bought shares worth Rs 338.46 crore and domestic funds sold shares worth Rs 7.17 crore on Friday, 11 December 2009.