Market may consolidate; industrial production data eyed

Indian stocks may eye global cues in the absence of major domestic triggers as market enters a consolidation phase after a strong post-budget rally. Recent global economic data was mixed. Sovereign debt problems in the euro zone continue to haunt global markets.

Closer home, the government's commitment towards reducing fiscal deficit, a thrust on infrastructure development, and plan to speed up disinvestment in the Union Budget for 2010-2011 has boosted market sentiment. Higher disposable income at the hands of individuals after the finance minister raised the tax slabs in the budget also opens up the possibility of some funds entering the market through the mutual funds route which augurs well for the secondary market.

However, with a spate of new and follow-on offerings to flood the market over the next few months, liquidity will be a major concern. The government has estimated Rs 40000 crore from disinvestment for FY 2010-11. In the Union Budget on 26 February 2010 the government said it would raise Rs 25,958 crore through disinvestment in the fiscal to March 2010. Of this, it has already raised Rs 13,592 crore through divesting minority stakes in NHPC, Oil India, NTPC and REC.

The follow on public offer (FPO) of NMDC is scheduled to open for subscription on Wednesday, 10 March 2010. The pricing for the disinvestment of 8.38% stake in NMDC will be decided on Monday, 8 March 2010 by an empowered group of ministers headed by finance minister Pranab Mukherjee. Retail investors have largely shunned stake sales by the government in recent weeks in NTPC and REC. As per reports, the floor price for the NMDC IPO could be set at Rs 300, or 29% below the prevailing market price of Rs 420, allowing the government to raise about Rs 9,000 crore.

The Indian market would act as a safe heaven for foreign investors as the state of the economy remains quite encouraging. The recent economic data showed surge in manufacturing and services activity in the month of February and rise in exports for the third consecutive month in January 2010.

The government will announce the industrial output data for the month of January 2010 on Friday, 12 March 2010. The data is expected to be robust after the infrastructure sector output which accounts for 26% of the industrial output showed a growth of 9.4% in January 2010 from a year earlier. Industrial output grew 16.8% in December 2009.

The fourth and the last installment of advance tax by India Inc due on 15 March 2010 will give a broad indication of fourth quarter earnings.

Meanwhile, the recent hike in petrol and diesel prices will further increase headline inflation. Higher inflation will put further pressure on interest rates which in turn may impact corporate and consumer confidence. Food prices will be keenly watched in coming weeks for the second and third round impacts of the fuel price rise. Market men see a 25 basis points hike in the repo and reverse repo rates each by the RBI at the April 2010 policy review.

Food price index rose 17.87% in the 12 months to 20 February 2010, faster than the annual rise of 17.58% in the previous week, government data released on 4 March 2010 showed. Food inflation data in the 12 months to 27 February 2010 will be announced on Thursday, 11 March 2010 followed by a inflation figure for the month of February 2010 on 15 March 2010.