Market may slump at open on weak global stocks; RIL in focus

Debt worries in the euro zone and and a rout in US stocks on Thursday may pull domestic market sharply lower. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicate that the Nifty could fall 84 points at the opening bell. All eyes are on the Supreme Court's verdict gas tussle between the Ambani brothers. The Supreme Court is likely to pronounce a judgement on the gas dispute between Reliance Industries (RIL) and Reliance Natural Resources (RNRL) at 10:30 IST today, 7 May 2010. The RIL-RNRL gas dispute has been heard by a three-member Supreme Court bench led by the Chief Justice of India. The tussle relates to supply of gas to Reliance Natural Resources (RNRL) from the D6 block in the Krishna-Godavari eastern offshore fields of Mukesh Ambani-led Reliance Industries (RIL).

The dispute landed in the Supreme Court after seeing many twists and turns in lower courts. The two sides - RIL and RNRL had approached Supreme Court challenging a decision by the Bombay High Court. The Bombay High Court, in its order dated 15 June 2009 had directed that RNRL will get assured supply of 28 mmscmd of gas from RIL's Krishna-Godavari basin for 17 years at $2.34 per million British thermal units (mBtu). The gas price was 44.28% lower than the price fixed by the government for gas sale from the RIL block in the KG basin at $4.2 mBtu.

Asian shares slumped again Friday as Wall Street's slide spooked already-jittery investors on escalating concerns that Greece's debt problems could spill over to other weaker European countries. The key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by between 0.95% to 3.74%.

US stocks plunged 9% in the last two hours of trading on Thursday before clawing back some of the losses as a suspected trading glitch and fears of a new credit crunch in Europe threw markets into disarray. The Dow suffered its biggest ever intraday point drop 998.50 points. The massive intraday slide was rumored to have been caused by erroneous trades that showed some shares briefly fell to nearly zero. The Dow Jones Industrial Average dropped 347.80 points, or 3.20% to 10,520.32 at close of trade. The Standard & Poor's 500 Index fell 37.75 points, or 3.24% to 1,128.15. The Nasdaq Composite Index lost 82.65 points, or 3.44% to 2,319.64.

European Central Bank President Jean-Claude Trichet rejected calls for more aggressive action to avert fiscal contagion in Southern Europe, shaking investors as he suggested the euro zone's monetary-policy makers have done all they can for now. Trichet offered only rhetorical support for Greece and Portugal, the two countries most at risk from high indebtedness and stagnant economic growth.

Back home, the fourth quarter corporate results announced so far have been fairly encouraging. The combined net profit of a total of 1202 companies rose 29.3% to Rs 40838 crore on 29.5% rise in sales to Rs 377114 crore in the quarter ended March 2010 over the quarter ended March 2009.

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.

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 ended a choppy trading session lower on Thursday, 6 May 2010 as debt worries in the euro zone weighed on investors' sentiment. The barometer index BSE Sensex fell below the psychological 17,000 level. The BSE 30-share Sensex fell 100.43 points or 0.59% to 16,987.53.

As per provisional figures on NSE, foreign funds sold shares worth Rs 937.75 crore and domestic funds bought shares worth Rs 379.96 crore on Thursday.