Market may edge higher in opening trade; food inflation data eyed

The market may edge higher at open if trading of S&P CNX Nifty futures on the Singapore stock exchange is any indication. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could gain 23 points at the opening bell. Revival of monsoon and sustained buying by foreign funds may support stocks. Asians stocks were mixed.



On the macro front, the government will unveil data on some wholesale price indices for the year through 3 July 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

In stock specific news, India's largest IT exporter by sales TCS and private sector bank Axis Bank will announce Q1 results today. Tata Steel announced after market hours on Wednesday that it will raise Rs 1600 crore via share, warrants issue to promoter Tata Sons.

Asian stocks were mixed on Thursday after early fall triggered by concerns about the global economic recovery. The latest data showed US retail sales declined. The Federal Reserve cut its growth forecast for the US economy. The key benchmark indices in China, Singapore, Hong Kong, Taiwan rose by between 0.09% to 0.44%. But, the key benchmark indices in Indonesia, Japan and South Korea fell by between 0.03% to 1.03%.

China's economic growth eased in the second quarter after the government succeeded in tempering credit expansion, investment spending and property speculation. The annualized first-half GDP growth came in at 11.1% higher than in the same period a year ago, but slower than the 11.9% annual growth recorded in the first quarter.

US stocks ended flat on Wednesday, 14 July 2010 after the Federal Reserve suggested additional measures may be needed to combat a weakening economy. Minutes of the Fed's June meeting showed officials are more concerned with the pace of economic recovery. That added to jitters stoked by a weak report on June retail sales. The Dow Jones Industrial Average edged up 3.70 points, or 0.04% to end at 10,366.72. The Standard & Poor's 500 Index dipped just 0.17 of a point, or 0.02% to 1,095.17. The Nasdaq Composite Index added 7.81 points, or 0.35% to close at 2,249.84.

Closer home, 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 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.

Analysts expect a further 25 basis points hike in short term interest rates by the central bank at the policy review later this month.

The latest data showed the headline inflation rose lower-than-expected 10.55% in June 2010. The rate of increase was higher than May's rise of 10.16%. Inflation for April 2010 was revised upwards to 11.23% from 9.59%.

Meanwhile, the revival of monsoon rains has helped accelerate the planting of rice, oilseeds and cotton. The area under rice cultivation jumped 56% to 7.2 million hectares on 9 July 2010 while cotton planting rose by half, last week, compared with a week before. 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 Southwest monsoon was vigorous over Chhattisgarh and active over Andaman & Nicobar Islands during past 24 hours, India Meteorological Department (IMD) said in its daily update on Wednesday, 14 July 2010. The IMD expects widespread rain/thundershowers in East Uttar Pradesh, Bihar and Sub-Himalayan West Bengal & Sikkim in the near term. Fairly widespread rainfall would occur over Orissa, Gangetic West Bengal, Jharkhand, Chhattisgarh, Vidarbha, Northeastern States, West Madhya Pradesh, Andaman & Nicobar Islands and Lakshadweep, the IMD said.

Fairly widespread rain/thundershowers would occur over west coast and scattered over Gujarat region, Madhya Maharashtra, Marathwada and South interior Karnataka, the IMD added. Isolated rain/thundershowers would occur over West Uttar Pradesh during next 24 hours and increase thereafter, it added.

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 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.

The key benchmark indices reversed gains after hitting 29-month highs at the onset of trading session on Wednesday, 14 April 2010 as lower European stocks and a sharp upward revision in inflation for April 2010 triggered profit taking. The BSE 30-share Sensex fell 47.74 points or 0.27% at 17,938.16.

As per provisional figures on NSE, foreign funds bought shares worth Rs 569.24 crore and domestic funds sold shares worth Rs 331.48 crore on Wednesday.

Foreign funds have bought Indian equities worth a net Rs 4023.53 crore this month so far, till 14 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 1488.52 crore this month so far, till 14 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.