April 2010 derivatives expiry may keep market volatile; inflation data eyed

The market is likely to see a flat-to-positive start after US stocks ended higher on Wednesday, 28 April 2010. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicate that the Nifty could rise 10.50 points at the opening bell. Stocks may exhibit high volatility during the day as traders roll over positions in the derivatives segment from the April 2010 series to the May 2010 series ahead of the expiry of the near-month April 2010 contracts today, 29 April 2010.

The government will unveil data on some wholesale price indices for the year through 10 April 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today, 29 April 2010.

The Q4 March 2010 corporate earnings announced so far have been good. The combined net profit of a total of 441 companies rose 28.70% to Rs 29125 crore on 36.40% rise in sales to Rs 249959 crore in the quarter ended March 2010 over the quarter ended March 2009.

Asian stocks were trading mixed. The market sentiment was cautious as investors remained concerned about sovereign-debt troubles in Europe. The key benchmark indices in Hong Kong, Japan, South Korea, Taiwan and Indonesia were down by between 0.04% to 2.57%. But, the key benchmark indices in China and Singapore rose 0.28% to 0.51%

US markets edged higher in volatile trade on Wednesday, 28 April 2010, after the US Federal Reserve hinted to signs of strength in the economy, giving some relief to investors worried about possible debt defaults in Europe. Earlier, stocks had declined after the rating firm Standard & Poor's downgraded its debt rating on Spain, a day after its downgrades on Greece and Portugal.

The Dow Jones Industrial Average gained 53.28 points, or 0.48%, to 11,045.27. The Standard & Poor's 500 Index rose 7.65 points, or 0.65%, to 1,191.36 and the Nasdaq Composite index added 0.26 points, or 0.01%, to 2,471.73.

The US Federal Reserve after a two-day policy meeting that concluded on Wednesday, 28 April 2010 left interest rates unchanged. The Fed offered a more upbeat view of the US economy and employment prospects. The Fed retained its pledge to keep interest rates low for an extended period because of low inflation and high unemployment. The Fed has kept interest rates near zero since December 2008.

Back home, the Congress-led United Progressive Alliance government sailed through a trial of strength in parliament on Tuesday by winning the cut motion demanded by opposition parties against an unpopular hike in fuel and fertiliser prices with smaller parties giving it a leg up to achieve a surprisingly strong victory. Prime Minister Manmohan Singh's government was backed by 289 MPs in the 545-strong Lok Sabha, while the opposition managed 201 votes. Two parties walked out on the vote, adding to abstentions. However, major reforms may take a backseat for the some time to come as there is a stiff resistance by the opposition on fears it may hurt the poor.

On the macro front, the latest data showed infrastructure sector output jumped 7.2% in March 2010 from a year earlier, higher than an upwardly revised rise of 4.7% in February 2010.

The Indian Meteorological department (IMD) expects normal rainfall in the June-September monsoon season this year. Rainfall is likely to be 98% of the long-term average, the IMD said on 23 April 2010. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation. The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season holds key.

The Reserve Bank of India expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand.

In its half-yearly World Economic Outlook, the International Monetary Fund (IMF) has pegged India's GDP growth at 8.75% in calendar 2010 and 8.5% in calendar 2011. According to the IMF, domestic demand in India will strengthen as the labour market improves, and investment is expected to be boosted by strong corporate profitability, rising business confidence and favourable financing conditions.

The RBI said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted. A 25 basis points hike in the cash reserve ratio (CRR) with effective from 24 April 2010 will suck out excess liquidity of Rs 12500 crore from the banking system.

The key benchmark extended losses for the second straight day on Wednesday, 28 April 2010 as world stocks reeled from rating downgrades on Greece and Portugal. The BSE 30-share Sensex fell 310.54 points or 1.76% to 17380.08 and The S&P CNX Nifty declined 92.90 points or 1.75% at 5,215.45.

As per provisional figures on NSE, foreign funds sold shares worth Rs 131.13 crore and domestic funds bought shares worth Rs 324.10 crore on Wednesday, 28 April 2010.