Market may extend losses on weak Asian stocks; food inflation data eyed

The market may extend losses for the fourth straight day tracking weak global stocks which fell on worries Greece debt crisis could have a contagion effect. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicate that the Nifty could fall 28.50 points at the opening bell. The government will unveil data on some wholesale price indices for the year through 24 April 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

Asian stocks slumped on Thursday on concern the Greek deficit crisis will spread through Europe and hurt the global economic recovery after Moody's Investors Service placed its credit rating for on a review for a possible downgrade. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan fell by between 0.36% to 3.15%.

US stocks sagged on Wednesday as more signs emerged that the fallout from the Greek debt crisis could spread to bigger European economies. However, generally positive data on the US private sector job market and the economy's services sector cushioned the negative tone. The Dow Jones Industrial Average dropped 58.65 points, or 0.54% to 10,868.12. The Standard & Poor's 500 Index fell 7.73 points, or 0.66% to 1,165.87. The Nasdaq Composite Index lost 21.96 points, or 0.91% to 2,402.29.

The European Central Bank (ECB) holds a regular policy meeting on interest rates today, 6 May 2010. Interest rates in the 16-member eurozone have now been on hold at an historic low of 1% for a year and many economists expect the ECB to leave borrowing costs unchanged till next year. The press conference of ECB chief Jean-Claude Trichet in which he is likely to update on Europe's role in Greece's bailout will be closely watched.

European leaders warned on Wednesday that the euro zone debt crisis could spread beyond Greece, and Moody's Investors Service said Portugal could be next to have its debt downgraded.

A massive Greek bailout package announced on Sunday, 2 May 2010, failed to halt rising jitters about sovereign-debt problems along the euro zone's boundary. Euro-zone governments and the International Monetary Fund hoped that the $145.14 billion rescue package for Greece would soothe investors' nerves over high sovereign-debt levels in Spain, Italy, Portugal and Ireland. Instead, it had the opposite effect, with fears that Greece's debt woes could spread to other countries. Investors are also concerned that the three-year financial package will not fix Greece's longer-term funding problems.

Fed Chairman Ben Bernanke will speak today at the Chicago Fed's 46th annual conference on bank structure and competition. The US weekly jobless claims data and April sales reports from chain stores is also due today.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 1126 companies rose 28.6% to Rs 38533 crore on 30.3% rise in sales to Rs 359503 crore in the quarter ended March 2010 over the quarter ended March 2009.

Dr Reddy's Laboratories, Punjab National Bank, Torrent Pharma, Union Bank of India, Rashtriya Chemicals & Fertilisers among others will announce their January to March 2010 quarter result today.

Meanwhile, business at Indian service companies rebounded to a 21-month-high in April 2010 on new business and high input prices. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 62.1 in April, its highest since July 2008, and compared with 58.1 in March 2010.

A recent industry body report showed that business confidence in India improved on the back of economic recovery. The bi-annual Business Outlook Survey of the Confederation of Indian Industry (CII) showed that the Business Confidence Index (BCI) of the Indian industry increased by 1.5 points for the April-September 2010 period, compared to the past six months.

The Indian Meteorological department (IMD) expects normal rainfall in the June-September monsoon season this year. Rainfall is likely to be 98% of the long-term average, the IMD said on 23 April 2010. 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 holds key.

The Reserve Bank of India 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. A 25 basis points hike in the cash reserve ratio (CRR) with effective from 24 April 2010 will suck out excess liquidity of Rs 12500 crore from the banking system.

In its half-yearly World Economic Outlook, the International Monetary Fund (IMF) has pegged India's GDP growth at 8.75% in calendar 2010 and 8.5% in calendar 2011. According to the IMF, domestic demand in India will strengthen as the labour market improves, and investment is expected to be boosted by strong corporate profitability, rising business confidence and favourable financing conditions.

The key benchmark indices extended losses for the third straight day on Wednesday 5 May 2010 on continued worries over fiscal health of euro zone nations. The BSE 30-share Sensex fell 49.18 points or 0.29% to 17,087.96 on Wednesday.

As per provisional figures on NSE, foreign funds sold shares worth Rs 1589.68 crore and domestic funds bought shares worth Rs 691.15 crore on Wednesday.