Market may recover on higher Asian stocks

The market may edge higher as Asian stocks reversed initial losses. Asian stocks had opened lower tracking sell-off in US stocks on Monday, 7 June 2010. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated a flat opening on the domestic bourses.

Commodity producers led Asian stocks higher on Tuesday after Federal Reserve Chairman Ben Bernanke said the US economic recovery is intact. The key benchmark indices in China, South Korea, Singapore, Japan, Indonesia, Hong Kong rose by between 0.09% to 0.88%. But, Taiwan's Taiwan Weighted fell 0.21%.



US Stocks fell on Monday 7 June 2010, taking S&P 500 to its lowest close in seven months, as industrials and technology shares fell. The Dow Jones Industrial Average lost 115.48 points, or 1.16% to 9,816.49. The Standard & Poor's 500 Index slid 14.41 points, or 1.35% to 1,050.47. The Nasdaq Composite Index tumbled 45.27 points, or 2.04% to 2,173.90.

Back home, the Indian government deferred till next week a decision on raising fuel prices on Monday, the second time in a year it has tripped on pushing politically-sensitive reform measures that could help trim a budget deficit. The Congress-led government held off the decision after two powerful ministers from coalition parties stayed away from a ministerial panel meeting, signalling opposition to the move on fears of voter backlash ahead of local polls over the next year.

The panel was to review the possibility of freeing up petrol prices and cutting subsidies on diesel, kerosene and cooking gas which could help reduce the fiscal deficit from the projected 5.5% of 2010/11 GDP and free up revenues for other programmes.

India's monsoon rains have revived after being stalled by a cyclone last week. According to the India Meteorological Department (IMD), the monsoon has advanced to some parts of the central Arabian Sea, most parts of coastal Karnataka and some parts of south interior Karnataka. The monsoon is expected to advance further in the next couple of days. "Conditions are favourable for further advance of the southwest monsoon into some more parts of the central Arabian sea; in some parts of Konkan-Goa and Central Maharashtra and in some more parts of Karnataka and Andhra Pradesh in the next two or three days," says the IMD daily weather report.

The monsoon rains were 11% below normal in the week to 2 June 2010, the weather office said on Thursday, 3 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.

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. Meanwhile, a revenue bounty for the government from the sale of telecom spectrum would help bring down fiscal deficit in the current financial year.

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 combined net profit of a total of 3,589 companies rose 13.7% to Rs 87,226 crore on 24.70% rise in sales to Rs 9,27,456 crore in the quarter ended March 2010 over the quarter ended March 2009.

The key benchmark indices edged lower on Monday, 7 June 2010, snapping a three-day winning streak, as weak global stocks marred investor sentiment. Nonetheless, the market ended off the day's low, mimicking a recovery in many Asian stocks from an intraday steep slide. Reports that monsoon has revived after being stalled by a cyclone last week, also aided intraday recovery on the domestic bourses on Monday. The BSE 30-share Sensex fell 336.62 points or 1.97% to 16,781.07.

As per provisional figures on NSE, foreign funds sold shares worth Rs 403.45 crore and domestic funds sold shares worth Rs 202.51 crore on Monday.

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 589.31 crore in the first five 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 bought stocks worth a net Rs 125.66 crore in the first five days this month. Domestic funds bought stocks worth a net Rs 6361.17 crore in May 2010.