Market may edge lower on weak Asian stocks; HUL's Q4 result eyed

Weak Asian stocks may pull the domestic bourses lower after Monday (24 May 2010)'s mild gains. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could fall 46 points at the opening bell. Volatility may remain high as traders roll over positions in the derivatives segment from May 2010 series to June 2010 series ahead of the expiry of the near-month May 2010 contracts on Thursday, 27 May 2010.

British bank Standard Chartered Plc's Indian Depository Receipts (IDRs) issue opens for bidding today. Standard Chartered has set the price band for its proposed issue of 240 million IDRs at Rs 100-115 each. Retail investors will be allotted shares at 5% discount to the issue price. The issue closes on 28 May 2010. Ten IDRs will represent one underlying equity share of Standard Chartered Plc.

Asian stocks fell sharply on Tuesday, extending an equity sell-off that sent Wall Street lower overnight. The key benchmark indices in China, Hong Kong, Japan, Singapore and Taiwan fell by between 1.29% to 2.37%.

South Korea's Kospi index fell 3.17% with talk of war looming between North and South Korea. North Korean leader Kim Jong II has ordered the country's military to get ready for war, according to news reports.

US stocks slid on Monday as fresh signs of Europe's banking problems emerged. Concerns about Europe's banking system continued to weigh on markets, after the Bank of Spain took over a small savings bank, CajaSur, over the weekend, increasing anxiety among investors worried about debt problems spreading throughout financial markets. The Dow Jones Industrial Average dropped 126.82 points, or 1.24% to 10,066.57. The Standard & Poor's 500 Index slipped 14.04 points, or 1.29% to 1,073.65. The Nasdaq Composite Index fell 15.49 points, or 0.69% to 2,213.55.

Economic data showed sales of previously owned US homes rose to a five-month high in April as buyers rushed to close on contracts before a federal home buyer tax credit expired, although housing inventory also increased.

Back home, Prime Minister Manmohan Singh on Monday said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. In a news conference to mark the completion of one year of the ruling Congress led United Progressive Alliance government at the Centre, the prime minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).

The RBI 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. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.

India's monsoon rains are on track to hit the country's southern coast on 30 May 2010, and the Laila cyclone in the Bay of Bengal would not derail the vital June-September rainfall, a weather office spokesman told a news agency last week. The India Meteorological Department (IMD) in late April 2010 said rainfall is likely to be 98% of the long-term average. 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 also holds key.

The latest data showed the food price inflation picked up for the second consecutive week in early May 2010. The food price index rose 16.49% in the year to 8 May 2010, a tad higher than the prior week's annual reading of 16.44% as fruit and vegetables prices climbed on the back of a heat wave. The fuel price index was steady at 12.33%, while the primary articles index was up 16.19% versus 16.76%

While the headline inflation declined to 9.59% in April 2010 from 9.9% rise in March 2010, the data for February 2010 was revised upwards to 10.06% from provisional figure of 9.89%, the latest government data showed. The RBI has forecast the headline inflation to ease to 5.5% at end-March 2011 on expectations of a normal monsoon.

Industrial output rose lower than expected 13.5% in March 2010. The growth was also slower than February's 15.1% expansion. Manufacturing sector output rose 14.3% in March 2010. Industrial output rose 10.4% in the 2009/10 fiscal year, faster than the 2.6% growth clocked in the previous fiscal year.

The fourth quarter corporate results have been decent. The combined net profit of a total of 2,368 companies rose 22.6% to Rs 59,857 crore on 24.3% rise in sales to Rs 5,92.242 crore in the quarter ended March 2010 over the quarter ended March 2009.

Hindustan Unilever (HUL), Tata Tea, NHPC, Mercator Lines, Jai Corp, Power Grid Corporation of India, Aban Offshore among others will announce their January-March 2010 quarter results today.

The key benchmark indices settled marginally higher, giving away strong intraday gains on Monday, 24 May 2010, as European stocks and US index futures fell. The BSE 30-share Sensex rose 23.94 points or 0.15% to 16,469.55 on Monday.

As per provisional figures on NSE, foreign institutional investors (FIIs) sold shares worth Rs 995.32 crore and domestic funds bought shares worth Rs 1107.42 crore on Monday, 24 May 2010. FIIs sold shares worth a net Rs 10,903.41 crore so far this month, till 24 May 2010, according to data from the stock exchanges. They had bought stocks worth a net Rs 2667.35 crore last month. Domestic funds have bought stocks worth a net Rs 5210.89 crore so far this month, till 24 May 2010.