Market may open higher on firm Asian stocks; RBI`s policy review eyed

Stocks may recover from losses in the preceding five trading days on higher Asian stocks. The Reserve Bank of India (RBI)'s of annual monetary policy statement for 2010/11 which is due at 11:15 IST today, 20 April 2010, may set the tone for the day. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could gain 7.50 points at the opening bell. The Reserve Bank of India is seen raising key short term interest rates by 25 to 50 basis points at a policy review today. The central bank is also expected to raise the cash reserve ratio to suck out excess liquidity from the banking system.

Among key results, Tata Consultancy Services (TCS), India's largest information technology services provider by sales, posted 9.7% growth in consolidated net profit as per Indian accounting standards to Rs 2,001 crore on 1.17% rise in revenues to Rs 7738 crore in Q4 March 2010 over Q3 December 2009. The result was announced after the market hours on Monday.

Motorbike maker Hero Honda Motors after market hours on Monday announced its net profit rose 48.8% to Rs 598.81 crore on 19.6% rise in total income to Rs 4191.81 crore in Q4 March 2010 over Q4 March 2009.

The RBI said on Monday, 19 April 2010, that the weight of monetary policy balance may have to shift to containing inflation since high inflation itself will dampen recovery in growth. The central bank in its document Macroeconomic and Monetary Developments in 2009-10 which serves as a background to the monetary policy statement 2010-11, said monetary policy management in 2010-11 will be dominated by the challenge of moderating inflation and anchoring inflation expectations, while remaining supportive of growth impulses. The Reserve Bank of India's survey of professional forecasters suggests a median GDP growth for 2010-11 at about 8.2%.

Though inflation is expected to moderate in the next few months from near-10% levels seen recently, upside risks remain, the RBI said. The latest data showed the wholesale prices rose 9.9% in March 2010 from a year earlier and a tad higher than February's annual rate of 9.89%.

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 the infrastructure sector.

The RBI had raised the cash reserve ratio (CRR) for banks by a more-than-expected 75 basis points in January 2010 and followed it with a between-meeting surprise 25 basis point increase in the key repo and reverse repo rates in March 2010.

Net capital inflows in India can be expected to increase further during the current year reflecting the prospects of higher growth and larger interest rate differentials between India and the advanced economies, RBI said on Monday. Higher capital inflows could influence asset prices, domestic liquidity conditions and the exchange rate, the central bank said. This will have implications for monetary management, it added.

Coming back to stocks, the focus is on the fourth quarter results and outlook provided by management for the current year. The combined net profit of a total of 72 companies rose 5.4% to Rs 4651 crore on 23% rise in net sales to Rs 34436 crore in the quarter ended March 2010 over the quarter ended March 2009.

Asian stocks rose on Tuesday, led by finance companies, as regulators were split on suing Goldman Sachs Group Inc., easing concern over the impact increased regulation on banks. The key benchmark indices in Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 0.25% to 0.76%. But, China's Shanghai Composite fell 0.52%.

US markets rose on Monday as investors reassessed the potential damage of the fraud case against Goldman Sachs and earnings optimism grew. Shares of Goldman Sachs recovered following news that the Securities Exchange Commission's decision to press on with charges of fraud against Goldman Sachs was only secured with a 3-to-2 vote, which suggested that the case might not be so strong. The Dow Jones Industrial Average rose 73.59 points or 0.67% to 11092.05. The S&P 500 gained 5.39 points or 0.45% to 1197.52. But, the Nasdaq fell 1.15 points or 0.05% to 2480.11.

Goldman Sachs stock had fallen nearly 13% on Friday after the Securities and Exchange Commission alleged it committed fraud in the structuring and marketing of a debt product tied to subprime mortgages, which cost investors more than $1 billion.

In earnings watch, Citigroup blew past earnings and revenue expectations. In economic news, leading indicators jumped 1.4% to a record high in March 2010, after an upwardly revised 0.4-percent increase in February.