Market may extend Wednesday's gains on higher Asian stocks

The market may extend Wednesday (12 May 2010)'s gains on firm Asian stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicate that the Nifty could gain 30 points at the opening bell. Asian stocks edged higher on Thursday, following strong gains on Wall Street on Wednesday. Spain on Wednesday outlined measures to cut its deficit, easing fears that the Greek debt crisis could spread in Europe. The key benchmark indices in China, Hong Kong, Japan, South Korea and Taiwan rose by between 0.07% to 1.56%. But, Singapore's Straits Times fell 0.04%.

US stocks surged on Wednesday boosted by technology and industrial shares, after Spain unveiled an austerity plan that reassured investors Europe was addressing its fiscal ills. The Dow Jones industrial average surged 148.65 points, or 1.38% to 10,896.91. The Standard & Poor's 500 Index rose 15.88 points, or 1.37% to 1,171.67 and the Nasdaq Composite Index added 49.71 points, or 2.09% to 2,425.02.

Spain said it will slash civil service pay and cut public-sector jobs, just a few days after EU finance ministers approved a 750 billion euro ($1 trillion) bailout package to stem the debt crisis, cheering investors. Markets had remained jittery in the past few days on worries a European debt crisis that began in Greece could spread around the world and potentially curb global growth.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 1574 companies rose 35.6% to Rs 46652 crore on 29.7% rise in sales to Rs 439962 crore in the quarter ended March 2010 over the quarter ended March 2009.

Crompton Greaves, Educomp Solutions, Gammon India, MTNL, Morepen Lab, Koutons Retail, Kewal Kiran Clothing , Tata Coffee among others will announce their January-March 2010 quarter results today.

On the macro front, the latest economic data showed 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 yield on the benchmark 10-year bond dropped two basis points to 7.59% on Wednesday after weaker-than-expected industrial production data, indicating bond investors do not see any immediate increase in interest rates by the Reserve Bank of India. It was above 8% a few weeks ago.

The 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.

The government will unveil data on some wholesale price indices for the year through 1 May 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today. 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%. 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.

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.

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.

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 benchmarks eked out small gains in volatile trade on Wednesday, 12 May 2010 on higher European stocks and recovery in US index futures. The BSE 30-share Sensex rose 54.28 points or 0.32% to 17,195.81 on Wednesday.

As per provisional figures on NSE, foreign funds sold shares worth Rs 297.23 crore and domestic funds bought shares worth Rs 180.42 crore on Wednesday.