Market may continue to gain, Reliance Industries may enter telecom space

The key benchmark indices may extend Wednesday (9 June 2010)'s gains tracking higher Asian stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could rise 3 points at the opening bell. The government will unveil data on some wholesale price indices for the year through 29 May 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.



In stock specific action, Reliance Industries (RIL) reportedly plans to enter the telecommunications sector when the opportunity arises. RIL is expected to go for only the lucrative corporate bandwidth market, or the business of selling telecom and internet services to companies rather than individuals. In May this year, the two Ambani brothers, Mukesh and Anil called off their non-compete agreements on all businesses other than gas-based power, enabling Mukesh Ambani to enter the telecom sphere.

ACC's cement dispatches for May 2010 was at 1.75 million tonnes versus 1.82 million tonnes in May 2009.

Most Asian stock markets rose on Thursday, but their gains were capped by ongoing worries over Europe's debt crisis and fears that the Gulf oil spill in the United States could send BP into bankruptcy court. The key benchmark indices in Japan, South Korea, Indonesia, Taiwan and Singapore rose by between 0.13% to 0.63%. But, Hong Kong's Hang Seng fell 0.04%

China's Shanghai Composite fell 0.69% even as its exports jumped 48.5% in May 2010 from a year earlier, the biggest gain in more than six years

South Korea's central bank left its key interest rate at a record low of 2% on Thursday as the country's recovery strengthens and worries persist over the health of the global economy amid Europe's debt woes.

US stocks fell on Wednesday in another late-day roller-coaster ride, dragged lower by BP and other energy shares as the US probe of the oil spill in the Gulf of Mexico deepened. The Dow Jones industrial average dropped 40.73 points, or 0.41% to 9,899.25. The Standard & Poor's 500 Index fell 6.31 points, or 0.59% to 1,055.69. The Nasdaq Composite Index lost 11.72 points, or 0.54% to 2,158.85.

The World Bank on Wednesday said a double-dip recession could not be ruled out in some countries if investors lose faith in efforts in Europe and elsewhere to tackle rising debt levels. The World Bank's Global Economic Prospects 2010 report said slower growth in developed economies would deprive developing countries of healthy markets for their goods and would cut into investment.

For the moment, worries that Greece's fiscal woes could spread to other highly-indebted countries, such as Spain and Portugal, has not affected growth in developing countries, the World Bank said. The World Bank forecast that developing economies would expand at between 5.7% and 6.2% each year from 2010 to 2012 -- more than twice the growth rate of advanced economies.

Back home, the monsoon rains have covered good ground to make up for most of the delayed onset forced by tropical cyclone Phet, reaching Karwar on the west coast on Monday. Monsoon flow over Arabian Sea, south peninsular India and Bay of Bengal is likely to intensify during next 3-4 days. Fairly widespread rainfall activity would occur over Madhya Maharashtra, Konkan & Goa, Coastal Karnataka, Kerala, Lakshadweep, northeastern states and Andaman & Nicobar Islands next 3-4 days, an India Meteorological Department (IMD) update said on Wednesday, 9 June 2010.

The monsoon rains were 11% below normal in the week to 2 June 2010. The June-September monsoon rains hit Kerala on 31 May 2010, a day ahead of schedule. 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.

Last month, Australia's weather bureau said the El Nino weather pattern was over. El Nino is caused by an abnormal warming of the eastern Pacific Ocean and can play havoc with weather patterns across the Asia-Pacific region.

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.

Data last week showed business activity remained strong for India's vast services sector in May 2010, with a key gauge growing for a 13th consecutive month even as some momentum was lost over the previous month. The HSBC-Markit Business Activity Index stood at 58.2 in May 2010 from a 21-month high of 62.1 in April 2010. A reading above 50 indicates expansion. Services make up about 55% of India's $1.2 trillion economy.

HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian firms, surged to a 27-month high of 59 in May 2010 from 57.2 in April 2010, bolstered by steady growth in output, new orders and employment. The rate of growth had slowed in March 2010 and April 2010.

On a flip side, another data showed that the food articles index rose 16.55% in the year to 22 May 2010, accelerating from previous week's rise of 16.23%. The primary articles index, which also includes food articles, rose 16.89%, higher than previous week's 15.90% rise. The fuel price index increased to 14.14 % versus 12.08% rise in the previous week.

India's economy grew at 8.6% in the March 2010 quarter driven by robust manufacturing sector on the back of government and consumer spending, data released by the government on Monday, 31 May 2010, showed. The growth was significantly higher than the revised 6.5% expansion in Q3 December 2009 and a 5.8% growth in Q4 March 2009. The manufacturing sector grew 16.3%, farm output rose 0.7%, mining sector expanded 14% and services increased by 8.4% in January-March 2010 quarter from a year earlier. For the full year to March 2010, the economy expanded 7.4%, above a government forecast of 7.2%. Economic growth had slowed down to 6.7% in year ended March 2009.

Investors will eye the first installment of the corporate advance tax payment which will give some clue about Q1 June 2010 corporate results. The first installment of corporate advance tax falls due on 15 June.

The key benchmark indices eked out small gains in a choppy trading session on Wednesday, 9 June 2010 as data showing a surge in car sales in May 2010 triggered bargain hunting after a two-day slide. Revival of the monsoon rains supported the domestic bourses. The BSE 30-share Sensex rose 40.79 points or 0.25% to 16,657.89 on Wednesday.

As per provisional figures on NSE, foreign funds sold shares worth Rs 256.51 crore and domestic funds bought shares worth Rs 127.56 crore on Wednesday.

Euro zone debt worries caused massive outflow of foreign funds from India recently as investors shunned risk. Foreign funds sold shares worth a net Rs 1088.71 crore in the first seven trading sessions this month, as per data from the stock exchanges. Foreign institutional investors (FIIs) had dumped shares worth a net Rs 12071.14 crore in May 2010.

Domestic funds have absorbed part of the selling by FIIs. Domestic funds bought stocks worth a net Rs 294.32 crore in the first seven days this month. Domestic funds bought stocks worth a net Rs 6361.17 crore in May 2010.