Market may snap last two days losses on firm global stocks

The market may snap last two days' losses on firm global stocks which rose on the back of strong first quarter Chinese GDP growth and good earnings reports from US firms. Expectations of a normal monsoon this year may also support domestic bourses. The government will announce the inflation data for the month of March 2010 today, 15 April 2010. Inflation is expected to have risen more than 10% for the month. The headline inflation rose 9.89% in February 2010.

Asian stocks rose on Thursday driving the MSCI Asia Pacific Index to a 20-month high on China's strong first quarter GDP figures and as better than expected US earnings reports from JPMorgan Chase & Co. to United Parcel Service Inc. bolstered confidence in the global economy. The key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan were up by between 0.3% to 0.89%.

China's Shanghai Composite rose 0.36% after China's economic growth accelerated to the fastest pace in almost three years in the first quarter. Gross domestic product rose 11.9% in Q1 March 2010, data showed today. The data also showed that China's consumer prices rose a less-than-estimated 2.4% in March from a year earlier.

US stocks rallied for a fifth straight session to a new 18 month high on Wednesday, 14 April 2010, after some strong earnings from major industry players and encouraging consumer spending data. The S&P 500 crossed 1,200 for the first time since September 2008. Intel and JP Morgan were the key Dow gainers after both beat earnings expectations. The Dow Jones Industrial Average rose 103.69 points or 0.94% to 11,123.11. The Nasdaq rose 38.87 points or 1.58% to 2504.86 and the S&P 500 rose 13.35 points or 1.12% to 1210.65.

A moderate US economic recovery is likely to warrant very low interest rates for a long time, Federal Reserve Chairman Ben Bernanke said on Wednesday.

Back home, 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 the past few weeks with the key benchmark indices surging to their highest level in more than 25 months on 7 April 2010.

The data on Monday, 12 April 2010 showed that industrial output rose 15.1% in February from a year earlier, less than a rise of 16.7% in January.

The changes in the proposed food security bill will not lead to India breaching its 2010/11 fiscal deficit of 5.5% Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, said on Tuesday. The headline inflation will be in the 5-6% range by the end of this fiscal year, he said.

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.

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. The stock market regulator Securities & Exchange (Sebi) has clarified that 14 private insurance companies will be required to take Sebi's prior approval for launch of new (Ulips). It has said that insurers can continue selling existing Ulip schemes which were in force as on 9 April 2010. Ulips are products similar to mutual funds with an added life cover. A large chunk of funds raised through Ulips are invested in equities.

It may be recalled that the finance ministry had to intervene, early this week, to resolve a tussle between Sebi and insurance regulator Insurance Regulatory and Development Authority of India (Irda) on oversight of Ulips after Sebi late last week barred 14 insurance firms from selling Ulips without its approval. Soon after the Sebi order Irda directed the 14 insurers to ignore the Sebi order saying that the implementation of the Sebi directive will bring the insurance industry to a standstill which would not be in public interest and would be detrimental to the interests of the policyholders and prejudicial to the interests of the insurers.

Following intervention from the government the two regulators had, early this week, decided to maintain a status quo on unit linkedinsurance plans or Ulips, keeping in abeyance the orders issued by both recently. The government had also reportedly asked the two regulators to seek a legal mandate from a court on oversight of Ulips.

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.

The forecast for the southwest monsoon for 2010 is another major trigger for the stock 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, had said on 18 March 2010.

The key benchmark indices registered small losses on Tuesday, 13 April 2010 tracking weak global stocks as the market fell for the second straight day. The BSE 30-share Sensex fell 31.04 points or 0.17% to 17,821.96 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 128.52 crore and domestic funds bought shares worth Rs 252.87 crore on Tuesday.

The stock market was closed on Wednesday, 14 April 2010, on account of Dr Babasaheb Ambedkar Jayanti.