Market seen extending two-day fall on weak global cues; inflation data eyed

The Market is seen extending its two-day decline following weak global cues. The S&P CNX Nifty futures for January 2010 expiry were trading 33.5 points lower in Singapore. However upgrade of growth forecast in major economies may cushion sharp fall.

The government will today unveil data on some wholesale price indices for the year through 9 January 2009 viz. the food price index, the primary articles index and the fuel price index.

Finance minister Pranab Mukherjee said on Wednesday the government was taking steps to contain inflation. The situation is constantly under review, he said. He also promised more measures to check the rise in the prices of essential commodities.

Food prices will cool off in 1-2 months and inflation will turn around, finance ministry's chief economic advisor Kaushik Basu said in a newspaper interview published on Wednesday. The Reserve Bank of India will hold its quarterly monetary policy review on 29 January 2010 and is widely expected to increase the cash reserve ratio (CRR) requirements for banks, but economists are divided on when it will raise interest rates. CRR is the level of cash that banks must keep in deposit with the central bank. Food prices rose near 20% in December from a year earlier, their highest in 11 years.

Monthly inflation may touch double digits by March 2010, Chief Statistician Pronab Sen told Television media on Tuesday. The wholesale price index rose to 7.31% in December 2009 from a year earlier, driven by higher food prices.

Economic growth will accelerate this year, Commerce and Industry Minister Anand Sharma said on Tuesday as he demanded better access to China's markets to help exports. Sharma's call for greater access for goods comes amid a widening trade gap between the two countries. Trade between the two grew rapidly to $50 billion in 2008, making China India's second-largest trading partner, but fell back to $43 billion in 2009 as global trade declined. Sharma called for more Chinese direct investment in India, especially in infrastructure, while noting that Indian firms are already present in China.

Reliance Industries may see action on reports it is unlikely to raise its offer price to take a controlling stake in LyondellBasell Industries.

Asian markets were trading lower today following a setback in US markets on Wednesday. Key benchmark indices in China, Hong Kong, South Korea, Singapore and Taiwan were down by between 0.11% and 1.27%. However Japan's Nikkei 225 index rose 0.37%.

US markets ended sharply lower on Wednesday, 20 January 2010, as earnings and the dollar's gains clipped the market's momentum. In earnings, Bank of America disappointed investors with a loss of $5.2 billion, which was worse than expected. Among others, Morgan Stanley's earnings fell short of analysts' expectations, but Wells Fargo posted an unexpected profit.

The Dow Jones industrial average lost 122.28 points, or 1.1%, to 10,603.15. The S&P 500 index fell 12.19 points, or 1.1%, to 1,138.04, and the Nasdaq Composite Index fell 29.15 points, or 1.3%, to 2,291.25.

The World Bank raised its forecast for global growth in 2010 and warned that the recovery may lose momentum in the second half of the year as government stimulus programs wind down and unemployment persists.

The world economy will expand 2.7% this year after the worst recession since the end of World War II, compared with an estimate in June of a 2% expansion, the Washington- based poverty-reduction agency said today in an annual report. Growth may reach 3.2% in 2011, the bank said.

The World Bank report also includes figures on last year's downturn, with an estimate that the global economy declined 2.2%, compared with the 2.9% decrease projected in June.

Growth in emerging nations is expected to reach 5.2% this year, compared with a June estimate of 4.4%, the bank said today. China will expand 9% this year and India 7.5%, it said.

The World Bank also raised its forecast for U.S. growth in 2010 to 2.5% growth, after predicting 1.8% in June. Japan's gross domestic product will expand 1.3% this year, more than the 1% predicted in June. The euro area's economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion.

Back home, key benchmark indices ended a choppy trading session marginally lower on Wednesday, extending losses for the second straight day as weak global stocks weighed on investor sentiment. The BSE 30-share Sensex fell 11.57 points or 0.07%. The Sensex had lost 155.02 points or 0.88% to 17,486.06 on Tuesday, 19 January 2010.

As per provisional figures on NSE, the foreign funds sold shares worth Rs 271.33 crore and domestic funds bought shares worth Rs 344.41 crore on Wednesday, 20 January 2010.