Market may extend Monday's sharp gains on higher Asian stocks; Hindalco Q4 result eyed

The market may extend Monday (10 May 2010)'s sharp gains on positive Asian stocks which rose for the second day in a row supported by European Union's massive rescue package on Sunday to contain Europe's debt crisis. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicate that the Nifty could open flat.

Asian stocks rose for the second day in a row on Tuesday, as investors extended their global buying frenzy after a nearly $1 trillion plan to contain Europe's debt crisis. The key benchmark indices in China, Japan, South Korea, Singapore and Taiwan rose by between 0.08% to 0.84%. But, key benchmark indices in Hong Kong and Indonesia fell by between 0.16% to 0.26%. Investors were reassured after the European Union and the International Monetary Fund agreed on Sunday to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt.

Meanwhile, China's consumer prices rose a more-than-estimated 2.8% in April from a year earlier, the fastest pace in 18 months. Another data showed industrial production rose 17.8% in April from a year earlier, after an 18.1% gain in March.

US stocks racked up their biggest one-day gain in over a year on Monday as an agreement on a $1 trillion emergency rescue package from the European Union reduced fears a new credit crisis would derail European economies. The Dow Jones Industrial Average gained 404.71 points, or 3.90% to 10,785.14. The Standard & Poor's 500 Index rose 48.85 points, or 4.40% to 1,159.73. The Nasdaq Composite Index added 109.03 points, or 4.81% to 2,374.67.

US market watchdogs and six major exchanges agreed new safeguards were needed to curb trading in plunging markets, an effort to address last Thursday's mysterious market free fall. Securities and Exchange Commission Chairman Mary Schapiro met on Monday with the leaders of major stock and option exchanges, as well as the brokerage industry watchdog, the Financial Industry Regulatory Authority (FINRA). Regulators still have not pinpointed the exact cause of last week's 20-minute market roller coaster, when many stocks dropped precipitously for several minutes before recovering most of their losses.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 1423 companies rose 29.1% to Rs 43204 crore on 28.9% rise in sales to Rs 406391 crore in the quarter ended March 2010 over the quarter ended March 2009.

Ranbaxy Laboratories, Hindalco Industries, Kotak Mahindra Bank, Bajaj Hindusthan, Bajaj Finserv, Bajaj Auto Finance, Jain Irrigation among others will announce their January-March 2010 quarter results today.

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 government will announce the industrial output data for the month of March 2010 on Wednesday, 12 May 2010. Industrial output rose by lower than expected 15.1% February 2010 and also lower than 16.7% rise in January 2010.

On Friday, 14 May 2010, the government will unveil data on inflation based on the wholesale prices for the month of April 2010. The headline inflation was 9.9% in March 2010. The RBI has forecast the headline inflation to ease to 5.5% at end-March 2011 on expectations of a normal monsoon.

Inflation based on food prices rose 16.04% in the year through 24 April 2010, slower than previous week's annual rise of 16.61%, the latest government data showed. Fuel prices inflation remained at elevated level. The fuel price index rose 12.69% in the year through 24 April 2010, same as a week ago. The primary articles index rose 13.93% in the year through 24 April 2010.

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 recouped a large portion of previous week's steep losses in a single trading session on Monday, 10 May 2010, as global stocks rallied after European leaders on Sunday, 9 May 2010, announced a rescue package to prevent Greece's fiscal woes from triggering a broader sovereign-debt crisis. The BSE 30-share Sensex surged 561.44 points or 3.35% to 17,330.55 on Monday. The Sensex had lost 4.5% last week as the Greece debt crisis made investors edgy about its impact on global economic recovery.

As per provisional figures on NSE, foreign funds foreign funds bought shares worth Rs 263.96 crore and domestic funds bought shares worth Rs 30.25 crore on Monday.