Infosys Q1 result to set the tone

The Q1 results of IT bellwether Infosys and revision in full year guidance, if any, from the IT major will set the tone for the market. Infosys is likely to announce the results before trading hours today, 13 July 2010. Investors will also watch Infosys' guidance for the second quarter ending September 2010 at the time of announcing the first quarter results. The Infosys stock had hit a record high of Rs 2,911.55 on Monday, 12 July 2010, ahead of the results. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could gain 11.50 points at the opening bell. Asian stocks were in green.



Asian stocks made modest gains on Tuesday, as investors took heart from Alcoa's stronger-than-expected quarterly profit reported after the close of US trade on Monday, 12 July 2010. The key benchmark indices in Hong Kong, Singapore, Indonesia, Taiwan, Japan and South Korea rose by between 0.06% to 0.58%. But, China's Shanghai Composite fell 1.21% after the Chinese government quashed speculation it will abandon real-estate curbs that drove property prices to snap 15 months of gains.

Caution prevailed in the US stock market on Monday, with indexes edging higher as investors reserved their bets ahead of the onset of the earnings season. The Dow Jones Industrial Average added 18.24 points, or 0.18% to end at 10,216.27. The Standard & Poor's 500 Index edged up just 0.79 of a point, or 0.07% to 1,078.75. The Nasdaq Composite Index gained 1.91 points, or 0.09% to close at 2,198.36. Dow component Alcoa Inc reported its second-quarter results after the closing bell. The aluminum producer reported a second-quarter profit as sales rose 22%.

Back home, the revived monsoon rains in India accelerated the planting of rice, oilseeds and cotton last week. The area under rice cultivation jumped 56% to 7.2 million hectares on 9 July 2010 while cotton planting rose by half, during the week, compared with the previous week, as monsoon rains were 2% above normal, ending a two-week dry spell since 18 June 2010. Rainfall was 16% below average in June 2010. The shortfall narrowed to 10% last week.

While total rainfall since 1 June 2010 is now 13% below normal, key crop areas such as rice-growing Punjab and Haryana and soybean-growing Madhya Pradesh have received adequate rains.

The weather office on Sunday, 11 July 2010, said it expects decrease in rainfall activity over parts of Gujarat, northwest, central and interior peninsular India this week. It sees widespread rainfall with isolated heavy to very heavy falls continuing over Sub-Himalayan West Bengal & Sikkim and northeastern states.

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 expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

Industrial output in May 2010 rose at a slower-than-expected 11.5% from a year earlier, data showed on Monday, 12 July 2010. Manufacturing output rose an annual 12.3%, the statistics office said. Mining output was up 8.7% and power generation rose 6.4%. Production of capital goods rose 34.3% year-on-year after an annual rise of 72.8% in April 2010, while consumer durables output grew 23.7%, down from a 37% rise in the previous month

April's industrial production growth was revised downwards to 16.5% from 17.6%.

The International Monetary Fund (IMF) on Thursday, 8 July 2010 raised its world output forecast for 2010, citing solid growth in the first half, especially in Asia, but warned of significant downside risks flowing from Europe. The IMF revised its 2010 world gross domestic product forecast to 4.6%, up from a previous forecast in April of 4.2%. The 2011 GDP forecast was unchanged at 4.3%.

The IMF raised India's growth forecast for 2010 to 9.5%, stating that favourable financing conditions and robust corporate profits will accelerate economic expansion. The IMF expects India's economy to grow 8.5% in 2011.

The Reserve Bank of India (RBI) on 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike is a part of the calibrated exit from the expansionary monetary policy.

Two-thirds of WPI inflation in May 2010 was contributed by non-food items, suggesting that inflation is now very much generalised and that demand-side pressures are evident, the central bank said in a statement. WPI inflation increased to 10.2% in May 2010, up from 9.6% in April 2010.

In its April 2010 policy review, the Reserve Bank projected real GDP growth for 2010-11 at 8% with an upside bias. More recent data suggest that the upside bias has largely materialized, the central bank on 2 July 2010. The growth projection will be reviewed in the first quarter review on 27 July 2010, RBI said.

Meanwhile, the government will announce the inflation data for the month of June 2010 on Wednesday, 14 July 2010.

The key indices extended gains for the third straight day on Monday, 12 July 2010, with stepping up of buying by foreign funds lifting spirits. Expectations of strong Q1 June 2010 results, also aided the rally. The 50-unit S&P CNX Nifty attained its highest closing level in more than 29 months. The Sensex attained its highest closing level in more than 3 months. The BSE 30-share Sensex rose 103.66 points or 0.58% at 17,937.20, its highest closing level since 7 April 2010.

As per provisional figures on NSE, foreign funds bought shares worth Rs 1001.75 crore and domestic funds sold shares worth Rs 293.05 crore on Monday.

Inflows into Indian stock funds rose to an 11-week high in the week ended 7 July 2010 as global investors responded to the arrival of monsoon rains, according global fund tracker EPFR Global. Global emerging market stock funds attracted $518 million and those investing in Asia (ex-Japan) drew $124 million, with Taiwan funds enjoying their second-best week this year, EPFR said.

Foreign funds have bought Indian equities worth a net Rs 2669.61 crore in the first few days this month (till 12 July 2010). Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010

Domestic funds have sold shares worth a net Rs 506.08 crore in the first few days this month (till 12 July 2010). They had sold equities worth a net Rs 4,777.05 crore in June 2010.

The major near term trigger for the market is Q1 June 2010 results of India Inc. Advance tax collections for the first quarter of the current financial year point to a strong growth in corporate sector profits. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year. Corporate advance tax for the first quarter stood at Rs 26,876 crore, against Rs 20,456 crore in the year-ago period, a rise of 31.4%, the fastest since 2005.

Auto firms are seen reporting strong Q1 results on the back of healthy volume growth. However, margins could be under pressure due to higher input costs. Improved lending growth will spur bottom line growth of banks whereas healthy order book will drive earnings of capital goods and engineering giants L&T and Bharat Heavy Electricals (Bhel). Higher sales realisation would boost boom line of metal firms.