Market may fall on weak Asian stocks

The market may fall snapping last two days gains on weak Asian stocks. Fresh worries over public finances of Greece, Portugal and other smaller euro zone countries had weighed on US stocks on Friday 29 January 2010. Shares of auto, cement, steel firms will be in focus as the companies release monthly sales volume for January 2010.

An interest rate hike would have indicated a greater degree of confidence in the recovery but the possibility of a mid-cycle action exists in case of a provocative situation, a deputy governor at the Reserve Bank of India (RBI) Subir Gokarn said on Friday 29 January 2010.

The Reserve Bank of India (RBI) surprised markets by raising banks' cash reserve requirements by more than expected on Friday 29 January 2010 and warned of mounting inflation, setting the stage for increasing interest rates in the coming months. The RBI kept short-term interest rates steady at its quarterly policy review but signalled hawkish intent.

The RBI said the CRR would be increased by 50 basis points from 13 February 2010 and a further 25 basis points to 5.75 % from 27 February 2010. It held its lending rate, or the repo rate, unchanged at 4.75 % and its reverse repo rate, at which it absorbs surplus cash from banks, unchanged at 3.25 %.

The cash reserve ratio was cut by 4 percentage points between October 2008 and January 2009 as the central bank moved to support the economy during the global financial crisis also slashing interest rates to their lowest levels since 2000.

The consumer price index rose 14.97 % in December 2009 from a year earlier, higher than November's annual rise of 13.51 %, government data showed on Friday. The annual wholesale inflation rose to 7.31 % in December 2009, compared with 4.78 % rise in November and 6.15 % a year ago.

The RBI said that reversing its accommodative monetary policy would be ineffective unless the government cuts borrowing, on track to hit a record Rs 4,50,000 crore ($97 billion) this fiscal year, putting pressure on the government to rein in spending when it releases its budget on 26 February 2010.India is joining a trend in other major emerging economies towards gradual tightening of loose monetary policies.

This month, China started to tighten policy by raising banks' reserve requirements, clamping down on loan growth and accepting higher yields at bill auctions Last week, Brazil -- another member of the BRIC quartet of emerging powers that also includes Russia -- held rates steady but left the door open for a possible rate hike.

The central bank lifted its wholesale price index inflation forecast for the end of the fiscal year in March to 8.5 % from 6.5 % and upgraded its economic growth forecast for the current fiscal year to 7.5 % from 6 %, predicting a similar rate of growth the following year. It said it expected inflation to moderate from July 2010, assuming a normal monsoon and steady oil prices, but the new forecasts convinced many analysts an interest rate rise was imminent.

Meanwhile, the capital market regulator has reportedly shut its doors on several foreign funds amid concerns that they may turn out to be vehicles for round-tripping of money by local residents. The Securities and Exchange board of India (Sebi) is taking a closer look at the structure of new investors, as well as those seeking renewals, following misreporting of transactions by blue-chip foreign institutional investors (FIIs) like Barclays and Societe Generale (SocGen) report said.

Asian stocks fell on Monday after Toshiba Corp. cut its revenue forecast and Honda Motor Co. recalled cars.The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore, Taiwan and Indonesia fell by between 0.33% to 1.53%.

China's manufacturing expanded at the second-fastest pace since 2008 in January 2010 as export demand improved, helping to cement the nation's recovery. The Purchasing Managers' Index fell to a seasonally adjusted 55.8 from 56.6 in December 2009.

Fresh worries over public finances of Greece, Portugal and other smaller euro zone countries have weighed on global stocks, pushing Wall Street lower on Friday despite data showing the U.S. economy grew at its fastest pace in six years in the fourth quarter.

U.S. stocks slid sharply on Friday, sending the benchmark S&P 500 down more than 1 % during the last half-hour of the session as investors pared back exposure to riskier assets amid worries about fiscal turmoil in Europe. The Dow was down 53.13 points, or 0.5%, to 10,067.33. The S&P 500 index was down 10.66 points, or 1%, to 1,073.87, the Nasdaq Composite Index shed 31.65 points, or 1.5%, to 2,147.35.

President Barack Obama on Friday proposed $33 billion in tax credits to coax small businesses into hiring workers as he underscored his commitment to pushing job creation to the top of his agenda.

Obama will deliver remarks on the U.S. budget on Monday. He is to speak about the fiscal situation after release of his spending blueprint for the 2011 fiscal year.

Tens of millions more people in Africa and elsewhere will be driven into poverty this year even though the world is recovering from the global financial crisis, World Bank president Robert Zoellick said on Sunday.

Closer home, the key benchmark indices staged a strong intraday rebound albeit in choppy trade, extending gains for the straight second day on Friday, 29 January 2010, as European stocks and US index futures rose. The BSE 30-share Sensex rose 51.09 points or 0.31% to 16,357.96 on that day.

As per provisional figures on NSE, foreign funds sold shares worth Rs 996.09 crore and domestic funds bought shares worth Rs 1011.02 crore on Friday.