Auto, cement stocks to be in focus

Automobile and cement stocks will be focus as companies announce sales volume data for the month of June 2010 in early July 2010. Investors will also closely watch the progress of the monsoon rains.



Global risk appetite holds key with regard to inflow of foreign funds into emerging market equities, including India. An increase in risk appetite normally triggers inflows whereas risk aversion triggers outflows. Foreign funds have made heavy purchases of Indian stocks this month. As per data from the stock exchanges, the net FII inflow totaled Rs 6900.07 crore in June 2010 (till 24 June 2010), compared to a massive outflow of Rs 12071.13 crore in May 2010.

Domestic funds, which had absorbed some of the heavy selling from foreign funds last month, offloaded stocks worth a net Rs 3970.14 crore this month so far (till 24 June 2010). Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.

On the global front, Group of 20 leaders will meet in Toronto on June 26-27 to discuss policies aimed at addressing Europe's crisis, spurring global growth and overhauling financial regulation.

Back home, investors will closely watch the progress of the monsoon rains. Annual monsoon rains were 11.1% below normal between June 1-23, the India Meteorological Department (IMD) said on 24 June 2010.

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 south-west monsoon usually covers the entire country by mid-July. The weather office 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 government's latest decision to raise fuel prices will stoke inflation, maintaining pressure on the Reserve Bank of India to tighten monetary policy. The government on Friday, 25 June 2010, raised petrol price by Rs 3.50 a litre, diesel price by Rs 2 litre, kerosene by Rs 3 litre and LPG by Rs 35 per cylinder.

The government has decided to decontrol petrol prices. The government will also eventually decontrol diesel prices, Oil Secretary S. Sundareshan said on 25 June 2010. The government will, however, continue to subsidize kerosene and LPG.