Market may open flat; TCS in focus after Q1 results

The market may open flat to slightly higher 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 3.50 points at the opening bell. Asian stocks were mostly in the red.



IT major TCS will be in focus as its Q1 results beat market expectations. TCS' consolidated net profit as per US accounting standards declined 5.31% to Rs 1844.30 crore on 6.21% growth in to Rs 8217.30 crore in Q1 June 2010 over Q4 March 2010. The company raised its hiring target by 10,000 to 40,000 for 2010-11, reflecting strong demand.

Larsen & Toubro, India's largest engineering company plans to raise $600 million (about Rs 2,700 crore) from institutional investors to fund future programmes that include building a large metro rail network and setting up power plants. The funds will be raised by offering shares to institutional investors through the qualified institutional placement route and will be completed within a year of the annual general meeting, L&T said in a notice to shareholders. The meeting is scheduled for 26 August 2010.

Most Asian stocks fell on Friday after US manufacturing contracted and wholesale prices dropped, fueling concern an economic recovery may be faltering. Technology stocks declined after Google Inc. earnings missed estimates. The key benchmark indices in China, Indonesia, Taiwan, Japan and South Korea fell by between 0.05% to 1.6%. But the key benchmark indices in Singapore and Hong Kong rose by between 0.12% to 0.15%.

US Stocks ended little changed on Thursday, recouping losses late in the day, led by a sudden turnaround in shares of Goldman Sachs and BP. The Dow Jones Industrial Average dipped 7.41 points, or 0.07% to end at 10,359.31. The Standard & Poor's 500 Index added 1.31 points, or 0.12% to 1,096.48. The Nasdaq Composite Index was off 0.76 of a point, or 0.03% to 2,249.08.

An unexpected fall in regional factory activity and a third straight month of decline in producer prices raised concerns about deflation, cooling enthusiasm for the strong start to the earnings season that had lifted stocks off recent lows.

Meanwhile, the US Congress approved a broad overhaul of financial regulation, sending it to President Barack Obama to sign it into a law.

Back home, in a major development, the stock market regulator Securities & Exchange Board of India (Sebi) has allowed physical settlement of both stock options and stock futures. At present only cash settlement of derivatives is allowed. Sebi said stock exchanges will also have flexibility to offer a combination of cash settlement for stock options and physical settlement for stock or physical settlement for stock options and cash settlement for stock futures.

A stock exchange may introduce physical settlement in a phased manner, it said in a circular. On introduction, however, physical settlement for all stock options and/or all stock futures, as the case may be, must be completed within six months, Sebi said. The settlement mechanism shall be decided by the stock exchanges in consultation with the depositories,the stock market regulator said.

On expiry/exercise of physically settled stock derivatives, the risk management framework (i.e. margins and default) of the cash segment shall be applicable, it said.Settlement of cash and equity derivative segments will continue to remain separate, the Sebi circular said.

The stock exchanges interested in introducing physical settlement are advised to submit to Sebi for approval, a detailed framework for implementation of physical settlement of stock derivatives. After opting for a particular mode of settlement for stock derivatives, a stock exchange may change to another mode of settlement after seeking prior approval of Sebi, it said.

Meanwhile, the lower exposure margin requirement for stock derivatives has become effective from Thursday, 15 July 2010.

The Securities and Exchange Board of India (Sebi) is reviving the practice of pre-opening session for share trades, and has asked stock exchanges to put systems in place for it. To begin with, the pre-open session will be introduced on a pilot basis, and will be applicable only for shares in the BSE Sensex and the S&P CNX Nifty.

On the macro front, the latest data showed that the fuel price index rose 14.27% in the year to 3 July 2010 and the food price index climbed 12.81%. Fuel price inflation eased from the previous week's annual rise of 18.02% while the pace of food price inflation edged up marginally from last week's 12.63%. Food inflation edged up because of higher rice and wheat prices. The primary articles index was up 16.25% compared with the previous week's reading of 16.08%.

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%.

The 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.

Agency reports on Thursday, 15 July 2010, said monsoon rains were 24% below normal in the week to 14 July 2010. It may be recalled that revival of monsoon rains last week had 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 had narrowed to 10% last week.

The Southwest monsoon was active over East Madhya Pradesh during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Thursday, 15 July 2010. The IMD expects fairly widespread rainfall over west coast, Uttarakhand, Uttar Pradesh, north Andhra Pradesh, Sub-Himalayan West Bengal & Sikkim, Bihar, Gujarat region, Chhattisgarh, Madhya Maharashtra, south interior Karnataka, Vidarbha, northeastern States, Madhya Pradesh, Andaman & Nicobar Islands and Lakshadweep, in the near term.

The IMD expects scattered rainfall over Saurashtra & Kutch, north Interior Karnataka, Gangetic West Bengal, Jharkhand and Marathwada in the near term. The IMD expects increase in rainfall over western Himalayan region and plains of northwest India after 48 hours. The IMD expects increase in rainfall activity over northwest, east and northeast India.

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.

Coming back to stocks, the key benchmark indices ended a tad lower on Thursday, 15 July 2010 amid volatility in European stocks and US index futures. The BSE 30-share Sensex fell 28.70 points or 0.16% at 17,909.46 on Thursday.

As per provisional figures on NSE, foreign funds bought shares worth Rs 365.09 crore and domestic funds sold shares worth Rs 588.46 crore on Thursday.