Market seen extending two-day rally on strong global cues

The market is likely to extend two-day strong gains on positive global cues. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could rise 64 points at the opening bell. The government will unveil data on some wholesale price indices for the year through 15 May 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

Auto and cement shares may see action ahead of release of May 2010 sales figures due to be announced next week. Tata Motors posted consolidated net profit of Rs 2571.06 crore for the year ended March 2010 (FY 2010) as compared with net loss of Rs 2505.25 crore in the year ended March 2009 (FY 2009). The result was announced after trading hours on 27 May 2010.

Apollo Hospital, Apollo Tyres, Asian Paints, BEML, EIH, Glenmark Pharma, HDIL, Indian Oil Corporation, ONGC, Punjab National Bank, Punj Lloyd, Sail, Unitech, and Sun TV Network will announce their January-March 2010 quarter results today.

Asian stocks extended gains for the third straight session on Friday after China reassured its commitment to investing in Europe. Key benchmark indices in China, Hong Kong, South Korea, Japan and Taiwan were up by between 0.46% to 1.01%.

US markets rallied on Thursday, 27 May 2010 after China said it remains a long-term investor in Europe. The Dow Jones Industrial Average rallied 284.54 points or 2.85% to 10,258.99. The Nasdaq index rose 81.80 points or 3.73% to 2,277.68 and the S&P 500 advanced 35.11 points or 3.29% to 1,103.06.

In economic data, the first quarter GDP showed that the US economy expanded at 3%. This is slower than the 3.2% increase that came with the advance estimate.

Back home, the Reserve Bank of India (RBI) on Wednesday eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.

Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday, 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.

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.

Prime Minister Manmohan Singh early this week 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.

The monsoon rains are likely to hit the country's southern coast in three to four days, the India Meteorological Department said in its latest forecast on Thursday. Conditions are becoming favourable for onset of southwest monsoon over Kerala during next 3-4 days, the weather office said.

The weather office had said late last week that rains were 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. 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 fourth quarter corporate results have been decent. The combined net profit of a total of 2,635 companies rose 13.60% to Rs 71372 crore on 25.40% rise in sales to Rs 733414 crore in the quarter ended March 2010 over the quarter ended March 2009.

Bulls were back with a bang as the key benchmark indices surged for the second straight day on Thursday, 27 May 2010, on firm global stocks after China signaled support for the euro zone. Volatility was high as derivative contracts for the May 2010 series expired on Thursday, 27 May 2010. The BSE 30-share Sensex rose 278.56 points or 1.76% to 16,666.40 and the S&P CNX Nifty jumped 85.70 points or 1.74% to 5,003.10.

As per the provisional data from the stock exchanges, foreign institutional investors (FIIs) sold stocks worth a net Rs 533.07 crore while domestic funds bought equities worth a net Rs 410.44 crore on 27 May 2010.