Market may extend Thursday's losses on weak global cues

Indian stocks may extend Thursday's losses on weak global equities. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could fall 4 points at the opening bell.

In stock specific news, PSU OMCs will be in focus as panel of ministers holds a meeting today, 25 June 2010, to decide on fuel prices. The Empowered Group of Ministers (EgoM) may consider freeing petrol price from government control and possibly giving limited autonomy to state-run oil firms to price diesel closer to market rates.



On 7 June 2010, the EGoM had deferred a meeting on fuel price due to lack of quorum. It may be recalled that an expert group headed by Planning Commission member Kirit Parikh had, in February 2010, recommended freeing petrol and diesel prices and a steep Rs 100 per cylinder hike in LPG rates and a Rs 6 per litre increase in kerosene prices.

Asian stocks slid for a fourth straight session on Friday, driven by worries of tighter financial regulation ahead of the weekend G20 meeting and uncertainty about the global economic recovery. The key benchmark indices in China, Hong Kong, Japan, Taiwan and South Korea fell by between 0.01% to 1.45%. But, the key benchmark indices in Indonesia and Singapore rose by between 0.22% to 0.32%.

US stocks slumped on Thursday as fresh signs of consumer weakness and worries about stringent financial regulation provoked investors to unload positions. The Dow Jones Industrial Average dropped 145.64 points, or 1.41% to 10,152.80. The Standard & Poor's 500 Index fell 18.35 points, or 1.68% to 1,073.70. The Nasdaq Composite Index lost 36.81 points, or 1.63% to 2,217.42.

A fall in initial jobless claims and a rise in a gauge of long-lasting manufactured goods failed to offset recent weak economic data, and the Federal Reserve on Wednesday gave a subdued assessment about the economy's recovery.

Back home, most Indian firms including Reliance Industries, L&T, Tata Steel and Tata Motors, have paid higher advance tax in Q1 June 2010 over Q1 June 2009. Higher advance tax payment normally indicates higher profits for the period under review. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year.

On the macro front, food inflation accelerated in mid-June 2010, maintaining pressure on the Reserve Bank of India to tighten monetary policy at a faster pace. The food price index rose 16.90% in the year to 12 June 2010, higher than the previous week's annual reading of 16.12%, data released by the government on Thursday showed. The fuel price index remained unchanged at 13.18% in the year to 12 June 2010.

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 Thursday, 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.

Global rating agency Fitch recently raised India's growth forecast to 8.5% in the year to March 2011 from earlier forecast of 7% growth. The rating agency raised the local currency rating outlook to stable from negative as it forecast a decline in government debt to GDP ratio to 80% by March 2011 from 83% at the end of March 2010.

Meanwhile, in a major development, the government recently ended the row over unit linked insurance plans or Ulip by promulgating an ordinance on Friday, 18 June 2010, stating that unit linked insurance policies with investment component are insurance products which will come under the regulatory jurisdiction of the Insurance Regulatory & Development Authority (Irda) and not the Securities & Exchange Board of India (Sebi). It amended four Acts to make it clear that Ulips are not securities and they did not form part of collective investment schemes or mutual funds.

The key benchmark indices registered marginal losses amid high volatility on Thursday, 24 June 2010 as traders rolled over positions in the derivatives segment from the near-month June 2010 contracts to July 2010 contracts. The near-month June 2010 derivatives contracts expired on Thursday 24 June 2010. The BSE 30-share Sensex lost 25.70 points or 0.14% at 17,730.24.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 1153.96 crore and domestic funds sold shares worth Rs 893.83 crore on Thursday.

Foreign funds have made heavy purchases of Indian stocks over the past few days. The net inflow totaled Rs 6900.07 crore in June 2010 so far (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. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.