Market may snap four-day winning streak

The market is likely to edge lower in the opening trade, halting a four-day rising trend, tracking weak Asian stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could fall 21.50 points at the opening bell.

Asian stocks edged lower on Tuesday as investors speculated over the future of Japan's prime minister and Chinese manufacturing growth slowed. The key benchmark indices in Hong Kong, South Korea, Indonesia, China, Japan and Taiwan were down by between 0.20% to 1.01%.

Data released today showed Chinese manufacturing expanded at a slower pace in May 2010. The Purchasing Managers' Index fell to 53.9 in May 2010 from 55.7 in April 2010, seasonally adjusted.

Trading in US index futures showed the Dow could fall 36 points at the opening bell on Tuesday, 1 June 2010. US markets were closed on Monday, 31 May 2010, for the Memorial Day holiday.

Global ratings firm Fitch Ratings on 28 May 2010 cut Spain's credit rating by one level to AA+ from AAA, saying the country's debt burden is likely to weigh on growth. Fitch cited an inflexible labor market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment. Spain is struggling to lower debt amid a fiscal crisis that prompted the European Union to forge an almost $1 trillion loan package for its weakest economies.

Spain's downgrade follows similar cuts in ratings of Greece and Portugal recently as those nations attempt to grapple with debt problems by implementing austerity measures.

Back home, shares of auto, steel and cement may see action ahead of release of May 2010 sales figures over the next few days. Reliance Communications may see action on reports South Africa's MTN Group may restart merger talks with the company.

As per government data released on 31 May 2010, 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. 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 India Meteorological Department (IMD) on 31 May 2010 said that the monsoon has hit the southern coast. 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 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.

Six core infrastructure industries registered a 5.1% growth in April 2010 compared with 3.7% rise in April 2009. For the financial year ended March 2010, the core sector posted a growth 5.5% as against 3% in the same period last year.

Data released on 28 May 2010 showed food inflation rose 16.23% in the year through 15 May 2010, lower than previous week's annual rise of 16.49%. The fuel price inflation also slowed to 12.08% from the previous week's 12.33%. The primary articles index was up 15.90%, compared with the previous week's annual reading of 16.19%.

Prime Minister Manmohan Singh in late May 2010 said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. The Prime Minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).

The Reserve Bank of India (RBI) on 26 May 2010, eased rules to boost liquidity at banks to avoid a cash crunch because of payments for corporate advance tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010. In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility.

Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.

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.

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.

In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.

The combined net profit of a total of 3,247 companies rose 14.10% to Rs 86993 crore on 25% rise in sales to Rs 917381 crore in the quarter ended March 2010 over the quarter ended March 2009.

Key benchmark indices clocked decent gains in a choppy trade on Monday, 31 May 2010, as robust GDP data and steady progress of monsoon lifted investor sentiment. The BSE 30-share Sensex rose 81.57 points or 0.48% to 16,944.63.

From a recent low of 16022.48 on 25 May 2010, the BSE Sensex gained has 922.15 points or 5.75% in four trading sessions.

As per the provisional data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 586.51 crore while domestic funds bought equities worth a net Rs 73.77 crore on 31 May 2010.