Market may recover on higher Asian stocks; Bhel, Tata Steel Q4 results eyed

The market may rebound after hitting 3-1/2 month low on Tuesday, 25 May 2010, tracking recovery in Asian stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could gain 33.50 points at the opening bell. But, 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.

Asian stock markets staged a rebound on Wednesday after a sharp cut on Tuesday caused by growing questions about the stability of the European banking system. The key benchmark indices in Hong Kong, Japan, Indonesia, Singapore and Taiwan rose by between 0.19% to 2.45%. But, the key benchmark indices in China and South Korea fell by between 0.32% to 0.65%.

US stocks staged a late rebound on Tuesday to end mostly flat as the focus shifted from European debt woes to buying after shares hit six-month lows. The Dow Jones Industrial Average dropped 22.82 points, or 0.23% to 10,043.75. The Nasdaq Composite Index shed 2.60 points, or 0.12% to 2,210.95. The Standard & Poor's 500 Index gained 0.38 points or 0.04% to end at 1,074.03.

US consumer confidence rose for the third straight month in May 2010 to the highest in more than two years. But, that was countered by a report showing single-family home prices dropping in the first quarter on renewed price pressure as federal aid faded away.

Closer home, the Indian Depository Receipts (IDR) issue of British bank Standard Chartered PLC received a muted initial response. The issue received bids for 1.11 crore shares on the first day of the issue on Tuesday, 25 May 2010 compared to 20.4 crore shares on offer. Standard Chartered has set the price band for the IDR 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.

The British bank on Monday, 24 May 2010, announced issue of 3.6 crore shares to anchor investors at Rs 104 each. The anchor investors include all the top domestic mutual funds.

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. 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 2,432 companies rose 24.1% to Rs 61301 crore on 24.1% rise in sales to Rs 6,04,086 crore in the quarter ended March 2010 over the quarter ended March 2009.

Bharat Heavy Electricals, Tata Steel, Oil India, Asian Hotels, Bank of India, HPCL, Godrej Industries, REI Agro among others will announce their January-March 2010 quarter results today.

The key benchmark indices tumbled to their lowest level in more than three months on Tuesday, 25 May 2010, as world stocks slumped amid tensions in Korea as well as anxiety over global debt levels and sovereign default fears. The BSE 30-share Sensex fell 447.07 points or 2.71% to 16,022.48, its lowest closing level since 10 February 2010.

Sustained selling by foreign funds has weighed on investor sentiment in the past few days. As per provisional figures on NSE, foreign institutional investors (FIIs) sold shares worth Rs 1464.19 crore and domestic funds bought shares worth Rs 406.12 crore on Tuesday, 25 May 2010. FIIs have sold shares worth a net Rs 12367.59 crore so far this month, till 25 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 5617.01 crore so far this month, till 25 May 2010.