Market may remain volatile amid choppy Asian stocks

The market may extend last two days' losses if trading in S&P CNX Nifty index futures on the Singapore stock exchange is of any indication. It indicated that the Nifty could fall 17 points at the opening bell. High volatility cannot be ruled out amid choppy Asian markets. Major Asian markets were higher Tuesday in volatile trade after US markets managed a late-session rebound when the dollar pulled back from a four-year high against the euro. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore and Taiwan rose by between 0.07% to 0.45%. But, the key benchmark indices in China and South Korea fell by between 0.25% to 0.34%.

Asia's strong growth outlook and prospects for better returns will lift capital inflows into the region but that could increase appreciation pressure on currencies which may require authorities to impose capital controls, a report from Asian Development Bank said.

RBI governor D Subbarao on 11 May 2010 said India prefers long-term capital inflows to short-term flows and non-debt flows to debt flows. There is no proposal to impose a Tobin type tax to rein in excessive capital inflows, the RBI governor said. However, it needs reiterating that no policy instrument is clearly off the table and the choice of instruments will be determined by the context, Subbarao added.

But, worries over fiscal problems in southern Europe triggered outflow from China and India funds during the week ended 12 May 2010. As a result, Asia funds, excluding Japan, saw only $27 million inflows, their worst week in well over a year, as per data from global fund tracker EPFR Global.

US stocks staged a comeback in late trading on Monday as bargain hunters snapped up beaten-down shares, setting aside concerns that efforts to tackle the euro-zone debt crisis could stifle the global economy. The Dow Jones Industrial Average edged up 5.67 points, or 0.05% to end at 10,625.83. The Standard & Poor's 500 Index added 1.26 points, or 0.11% to 1,136.94. The Nasdaq Composite Index rose 7.38 points, or 0.31% to close at 2,354.23.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 2,040 companies rose 24.7% to Rs 54,430 crore on 25.4% rise in sales to Rs 5,45,282 crore in the quarter ended March 2010 over the quarter ended March 2009.

Chennai Petroleum Corporation, Bombay Rayon, ICRA, JK Lakshmi Cement, Bilpower among others will announce their January-March 2010 quarter results today.

On the macro front, 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.

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.

India Meteorological Department (IMD) said on Monday, 17 May 2010, that conditions are favourable for further advance of monsoon over more parts of Bay of Bengal and remaining parts of Andaman during next 48 hours. The southwest monsoon has set over the Andaman and Nicobar islands and some parts of southeast Bay of Bengal.

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 also holds key.

The Reserve Bank of India (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 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.

Rally in index heavyweight L&T aided an intraday rebound on the domestic bourses on Monday, 17 May 2010, triggered by recovery in European stocks and US index futures. Intraday volatility was high. The BSE 30-share Sensex ended the day with a loss of 159.04 points or 0.94% to 16,835.56 on Monday.

As per provisional figures on NSE, foreign funds sold shares worth Rs 1224.29 crore and domestic funds bought shares worth Rs 381.89 crore on Monday.