Market may fall on weak Asian stocks; food inflation data eyed

The key benchmark indices may fall tracking weak global stocks after a recent sharp surge with indices scaling more than 25 month closing high backed by expectations of good fourth quarter result by India Inc and heavy foreign fund inflows. Meanwhile, the government will unveil data on some wholesale price indices for the year through 27 March 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today, 8 April 2010.

Asian stocks fell for the first time in six days on Thursday after Japanese machinery orders unexpectedly dropped and U.S. consumer credit slumped more than economists forecast. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea and Singapore fell by between 0.03% to 0.79%. But Taiwan's Taiwan Weighted rose 0.13%.

There was zero economic growth in the euro region from October through December, the statistics office said yesterday, after previously reporting a 0.1% expansion.

The European Central Bank will flesh out on Thursday a revamp of its lending rules to help ease the financial squeeze on Greece, while keeping euro zone interest rates at a record low 10%. the focus will remain squarely on what President Jean-Claude Trichet has to say on the subject after the bank's monthly meeting.

US stocks slipped on Wednesday after a senior Federal Reserve member said policy makers should start raising rates to 1% soon and Greek debt concerns. In economic data, mortgage applications ticked up just 0.2% last week as a spike in mortgage rates clipped demand for refinancing. Another report showed consumer borrowing fell by $11.5 billion in February, much weaker than the $500 million gain expected.

The Dow Jones fell 72.47 points or 0.86% to 10,897.52. The Nasdaq declined 5.65 points or 0.23% to 2431.16 and the S&P 500 fell 6.99 points or 0.59% to 1182.45.

The U.S. government will encourage China, India, Brazil and other fast-growing markets to buy more American goods as part of its bid to double exports in five years, Under Secretary for International Trade Francisco Sanchez said on Wednesday.

Close home, the Reserve Bank of India will have to further tighten monetary policy on 20 April 2010 if prices continue to rise, as expected, from 9.89% headline inflation in February, the chief statistician said on Wednesday. The Reserve Bank of India (RBI) will review its monetary policy on 20 April 2010. Sen, however, declined to specify what policy actions were required, saying it was for the central bank to decide.

The four-month spell of wholesale price inflation above the RBI's perceived comfort zone of 5% prompted the central bank in March to unexpectedly hike its key lending rates by 25 basis points.The Reserve Bank last month warned of inflationary pressures from higher capacity utilisation and rising commodity and energy costs.

Sen said WPI inflation in March was likely to be higher than February's 9.89%, partly due to a low base effect. Headline inflation could start easing from April when the base effect starts wearing off, he added, noting that food price inflation has already started moderating. The inflation for the month of March 2010 will be announced by the government on 12 April 2010. The food price index rose an annual 16.35% in the 12 months to 20 March 2010, above the previous week's reading of 16.22%. Fuel inflation rose 12.75%in the same period from the previous week's 12.68% rise. Sen said non-agricultural inflation was still accelerating.

Stock-specific action may rule the roost in the near term based on expectations of Q4 March 2010 results. IT bellwether Infosys kickstarts the reporting season on 13 April 2010.

The BSE Sensex vaulted 7,819.27 points or 80.5% in the year ended March 2010 (FY 2010) helped by heavy purchases by foreign institutional investors. As per data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 14,792.31 crore in March 2010. Indian companies raised over Rs 47,800 crore through public offers during the fiscal 2009-2010, following buoyant secondary market.

Global credit rating agency Standard & Poor's, last month, revised the outlook on India to stable from negative due to improved government finances.

The forecast for the southwest monsoon for 2010 is the next major trigger for the market. 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, said on 18 March 2010. The cyclical heating of the Pacific Ocean known as El Nino will continue to fade, US forecasters said last month. The weather event, which occurs every four to seven years, brings more rain to South America and less precipitation to Asia.

Meanwhile, abnormally hot weather and lower than expected rains are reportedly raising the spectre of India facing another water shortage in the coming kharif season, said a senior official of the Indian Meteorological Department, the country's weather forecasting agency. Rains have been 66% lower than normal in March. Temperature has been 4 to 7 degrees above normal, making it the hottest March in almost a decade report said.

The key benchmark indices registered small gains in what was a highly volatile trading session on Wednesday, 7 April 2010. The market attained its highest closing level in more than 25 months. The barometer index BSE Sensex fell below the psychological 18,000 level after racing above that level in early afternoon trade. The BSE 30-share Sensex rose 28.65 points or 0.16% to 17,970.02, its highest closing level since 19 February 2008 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 338.78 crore and domestic funds sold shares worth Rs 23.43 crore on Wednesday.