Market may open flat to lower

The key benchmark indices may open flat to lower after the US Federal Reserve gave a more cautious tone about the strength of the US economic recovery. Trading of the S&P CNX Nifty on the Singapore stock exchange indicated that the Nifty could fall 15.50 points at the opening bell. Asian markets were mixed. Volatility is expected to remain high as traders roll over positions in the derivatives segment from the near-month June 2010 contracts to July 2010 contracts ahead of the expiry of the near-month June 2010 derivatives contracts today, 24 June 2010.



The government will unveil data on some wholesale price indices for the year through 12 June 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

Asian stock markets were mixed on Thursday after the Federal Reserve gave a more cautious tone about the strength of the US economic recovery. The key benchmark indices in Japan, Singapore and Taiwan rose by between 0.13% to 0.25%. But, the key benchmark indices in China, Hong Kong, Indonesia and South Korea fell by between 0.07% to 0.2%.

Japan on Thursday said that exports rose 32.1% in May from a year earlier to 5.3 trillion yen ($59 billion), marking the sixth month of year-on-year increase.

US stocks mostly fell in a volatile session on Wednesday after the Federal Reserve downgraded its assessment of the economic recovery as it vowed to keep cheap money flowing. The Dow Jones industrial average edged up 4.92 points or 0.05% to finish at 10,298.44. But the Standard & Poor's 500 Index dipped 3.27 points, or 0.30% to close at 1,092.04. The Nasdaq Composite Index fell 7.57 points, or 0.33% to close at 2,254.23.

Sales of new US homes dropped a record 32.7% in May to the lowest level in at least four decades as the impetus from a popular tax credit faded, a report showed on Wednesday.

At the end of a two-day policy meeting, the Federal Reserve in a statement scaled back its assessment of the pace of recovery in the world's largest economy, taking note of pockets of weakness, and also issued a cautionary note about volatile financial markets in light of Europe's debt woes. Fed in its monetary policy statement, suggested interest rates will remain near zero longer than expected.

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.

Investors will closely watch the progress of the monsoon rains. Annual monsoon rains, vital to the trillion-dollar economy's farm output and economic growth, were 9.4% below normal for June 1-22, the Met office said on Wednesday. Countrywide rainfall was 93.2 mm between June 1 and June 22 against normal 102.9 mm, the India Meteorological Department said in its latest update.

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.

Higher US index futures and recovery in European stocks helped the domestic bourses erase steep intraday losses to close flat on Wednesday, 23 June 2010. The BSE 30-share Sensex was up 6.25 points or 0.04% at 17,755.94 on Wednesday.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 265.33 crore and domestic funds sold shares worth Rs 866.22 crore on Wednesday.

Foreign funds have made heavy purchases of Indian stocks over the past few days. The net inflow totaled Rs 5746.12 crore in June 2010 so far (till 23 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 3076.32 crore this month so far. Domestic funds had mopped up equities worth a net Rs 6361.17 crore in May 2010.