Market may snap last two days' gains on weak global stocks; inflation data eyed

The market may snap last two days' gains on weak global stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicate that the Nifty could fall 10.50 points at the opening bell. Meanwhile, the government will unveil data on inflation based on the wholesale prices for the month of April 2010 at 12:00 IST today, 14 May 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.

Infrastructure stocks may edge higher on reports the government plans to launch a Rs 50000 crore fund to build infrastructure, with 40% of the corpus from overseas investors. The government proposes to raise Rs 20000 crore from overseas pension, insurance and sovereign wealth funds and the remainder from domestic institutions, reports suggest.

Asian stocks fell on Friday, surrendering part of the prior session's rally, as investors remained skittish in the face of euro zone debt worries and doubts about the US economic recovery. The key benchmark indices in China, Hong Kong, Japan, South Kroea, Singapore and Taiwan fell by between 0.15% to 1.61%. But, Indonesia's Jakarta Composite rose 0.02%.

US stocks fell on Thursday as downbeat comments on the economy from tech company Cisco Systems Inc and retail chain Kohl's Corp cast doubt on the strength of the economic recovery. The Dow Jones Industrial Average dropped 113.96 points, or 1.05% to end at 10,782.95. The Standard & Poor's 500 Index fell 14.23 points, or 1.21% to 1,157.44. The Nasdaq Composite Index lost 30.66 points, or 1.26% to close at 2,394.36.

A report showed the number of US workers filing for jobless benefits fell only slightly last week, which failed to back up sharply improving monthly payrolls data.

Meanwhile, Portuguese leaders agreed tough austerity measures on Thursday, joining a coordinated euro zone push that has calmed market fears of a spreading debt crisis. Prime Minister Jose Socrates and opposition leader Pedro Passos Coelho drew up steps to slash Portugal's budget deficit, including 5% pay cuts for senior public sector staff and politicians, and increases of VAT sales tax, income tax and profits tax ranging from one to 2.5%.The cabinet approved the programme later. The government said it would cut the deficit to 7.3% of GDP this year and 4.6% in 2011.

On Wednesday, 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. 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 1622 companies rose 31.2% to Rs 45438 crore on 29.6% rise in sales to Rs 445658 crore in the quarter ended March 2010 over the quarter ended March 2009.

Among major results, DLF, State Bank of India and National Aluminum Company will announce their January-March 2010 quarter results today.

Reliance Communications and Reliance Infrastructure will announce their January-March 2010 quarter results tomorrow, 15 May 2010.

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 latest government data showed the food price index rose 16.44% in the year to 1 May 2010, higher than previous week's annual rise of 16.04%. The fuel price index rose 12.33%, lower than previous week's annual 12.69% rise. The primary articles index jumped 16.76%, from previous week's annual gain of 13.93%.

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.

Reserve Bank of India governor D Subbarao on Tuesday, 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 in a speech delivered at a conference in Zurich on Tuesday. 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.

The key benchmark indices gained for the second consecutive session on Thursday, 13 May 2010, as Asian stocks rose. The BSE 30-share Sensex rose 70.06 points or 0.41% to 17,265.87 on Thursday.

As per provisional figures on NSE, foreign funds sold shares worth Rs 15.57 crore and domestic funds bought shares worth Rs 222.40 crore on Thursday.