Market may extend two days gains on positive Asian stocks; TCS eyed

The market may extend last two days gains on positive Asian stocks. US stocks rose on Thursday on better than estimated result by Intel Corp. Investors will closely watch Q3 December 2009 result from IT major Tata Consultancy Services (TCS) and banking majors HDFC Bank and Axis Bank due later in the day today.

The inflation jumped to a one-year high in December, reinforcing views the Reserve Bank of India (RBI) will start increasing reserve requirements later this month to contain price pressures as the economic recovery strengthens. Markets have mostly factored in a 50-basis point rise in the cash reserve ratio (CRR), the level of cash banks must keep with the central bank, on 29 January 2010 but recent strong data has raised expectations that policy rates might also be raised.

The wholesale price index rose 7.3 % in December from a year earlier, its highest since November 2008 and accelerating from a 4.8 % gain in November, data showed on Thursday. The rise was driven by near 20 % jump in food prices, which rose on weak monsoon rains and flooding in parts of the country, but inflation in manufacturing products picked up to 5.2 % from 4 % in November, a sign that inflationary pressures were spreading to other sectors of the economy.

Data also showed on Tuesday industrial output grew at faster-than-expected 11.7 % in November from a year earlier. The purchasing managers' index rose to its highest since May in December while car sales rose an annual 40.3 % last month.

The government, which is pressing the RBI to hold rates to ensure the $1.2 trillion economy's recovery, ordered this week the sale of stocked grain and extended duty-free sugar imports by another nine months, hoping to rein in high food inflation.

Meanwhile, a panel of experts will review over the next three months how to encourage foreign investment in the financial sector such as the bonds and the stock markets, the government said on Thursday. The panel, which has experts from both the private and the government sectors, will identify challenges in meeting the financing needs of the Indian economy through foreign investment, according to a government statement. The panel will take views on foreign investments till 10 February 2010, the statement said, and will submit its report by mid-March.

Federal policy makers, including deputy chairman of Planning Commission Montek Singh Ahluwalia have said that India needs more capital flows especially for infrastructure sector.

Banks on Thursday urged the Reserve Bank of India (RBI) to keep interest rates stable at its policy review later this month, saying any increase could further dent sluggish demand for loans.

Most Asian stocks rose after early volatility on Friday as a better-than-estimated revenue prediction from Intel Corp. countered declines by energy shares after oil prices fell. The key benchmark indices in China, Indonesia, Hong Kong, South Korea, Singapore and Taiwan rose by between 0.18% to 0.75%. But Japan's Nikkei fell 0.17%.

Technology shares drove Wall Street higher on Thursday on bets ahead of Intel's quarterly results that business spending will bolster profits in the sector. Bank stocks gained after President Obama announced a tax that would amount to 90 billion dollars over 10 years against banks that received federal bailout funds. The Dow gained 29.78 points, or 0.3%, to 10,710.55. The broader Standard & Poor's 500 index rose 2.78 points, or 0.2%, to 1,148.46, and the Nasdaq Composite Index rose 8.84 points, or 0.4, to 2,316.74.

In economic data, the latest initial jobless claims increased 11,000 from the previous week to 444,000. But continuing claims dropped larger than expected to 4.60 million. In other data, advance retail sales for December 2009 decreased 0.3%, which was weaker than the 0.5% increase that had been expected.

Closer home, the key indices edged higher on Thursday 14 January 2010, gaining for the second straight day on firm Asian stocks. The BSE 30-share Sensex rose 75.07 points or 0.43% at 17,584.87.

As per provisional figures on NSE, foreign funds sold shares worth Rs 312.01 crore and domestic funds bought shares worth Rs 529.12 crore on Thursday.