Market may extend last three days` losses on weak Asian stocks

The market may extend last three days' losses on weak Asian stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could fall 15 points at the opening bell. Asian stocks fell on Friday, bucking overnight gains on the Wall Street as investors locked in profits. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.09% to 1.35%.

US stocks posted their sixth straight day of gains on Thursday as an encouraging profit forecast from United Parcel Service lifted transportation shares, though concerns about a rise in weekly jobless claims limited the market's advance. The Dow Jones Industrial Average rose 21.46 points or 0.19% to 11,144.57. The Nasdaq rose 10.83 points or 0.43% to 2515.69 and the S&P 500 rose 1.02 points or 0.08% to 1211.67.

In economic news, weekly initial jobless claims were up more than expected to 484000, while continuing claims climbed to a worse-than-expected 4.64 million. Industrial production ticked up 0.1% in March, which was lower than expected. Among major results, Internet search company Google reported after the closing bell that its first-quarter profit jumped 37% to $1.96 billion with revenue rising 23% to $6.78 billion.

Back home, the latest data showed the wholesale prices rose 9.9% in March 2010 from a year earlier and a tad higher with February's annual rate of 9.89%. Finance Minister Pranab Mukherjee said price pressures would continue until June, when summer harvests and good rains should help cool prices.

Rising inflation remains a key cause for concern. A sharp surge in interest rates may adversely impact private investment demand as well as the proposed large scale investment in infrastructure sector. Investors have already priced a 25-basis point rate rise at the Reserve Bank of India's policy review on 20 April 2010. Last month, the RBI raised the repo rate and the reverse repo rate, at which it absorbs excess cash from the banking system, by 25 basis points each.

Meanwhile, double-digit annual growth in industrial output for the fifth straight month in February 2010 underlined the strength of the recovery. Data on Monday, 12 April 2010, showed the industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January.

The fourth quarter earnings of India Inc are major near term trigger for the market. This is because the Q4 March 2010 results and management commentary on outlook could result in revision in earnings estimates of India Inc by analysts for the year ending March 2011 (FY 2011).

Expectations of good fourth quarter result by India Inc and heavy foreign fund inflows boosted the domestic bourses in recent weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010.

Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season 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.

Tokyo-based Research Institute for Global Change has predicted normal monsoon rains in India for the current year. Agriculture secretary P K Basu said in a media interview on Monday, 5 April 2010, that early signs indicate normal monsoon rains this year. The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data.

A weakening El Nino is a positive sign for the monsoon, Ajit Tyagi, director general at the India Meteorological Department, had said on 18 March 2010.

Meanwhile, Sebi has tightened disclosure norms for foreign institutional investors (FIIs) and sub-accounts with regard to the investment structure in India. The norms are applicable for new registrations from 7 April 2010. Existing FIIs and sub-accounts can provide the additional information by 30 September 2010.

These foreign investors will now have to disclose to the regulator whether they are a multi class vehicle (MCVs), segregated portfolio company (SPC) or a protected cell company (PCCs) and whether they maintain segregated or a common portfolio.

Meanwhile, a new rule released by the Department of Industrial Policy and Promotion (DIPP) has clarified that an individual foreign institutional investor (FII) will not be allowed to pick up more than 10% equity in an Indian company even if it is coming through the foreign direct investment route thus limiting their ability to acquire big stakes in companies.

Meanwhile, it remains to be seen if and to what extent the recent controversy with regard to unit linked insurance plans (Ulips) negatively impacts inflows into Ulips which are a major source of inflows into equities. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.

The stock market regulator Securities & Exchange Board of India (Sebi) has reportedly moved the Supreme Court and some high courts to guard against any ex parte decision after insurance regulator Insurance Regulatory and Development Authority of India (IRDA)'s decision to challenge Sebi's ban on unit-linked insurance products (Ulips). On 9 April 2010, Sebi had banned 14 life insurance companies from raising funds through Ulips without its approval.

IRDA, on the other hand, asked insurers to ignore the Sebi ban. On Tuesday, Sebi came out with a second order that exempted existing Ulips from the ban, but said its nod was must for issuing new Ulips issued after 9 April 2009.

According to IRDA, a total of 16.7 lakh Ulip policies, with a premium of Rs 44611 crore, were sold from 1 April 2009 to 28 February 2010. A total of 7.03 crore Ulip polices involving a total premium of Rs 90645 crore were in force in 2008-09.

Profit booking in some large-cap stocks dragged the key indices to their lowest level in two weeks on Thursday, 15 April 2010. The BSE 30-share Sensex fell 182.70 points or 1.03% to 17,639.26 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 99.70 crore and domestic funds sold shares worth Rs 76.87 crore on Thursday.