Market may open higher on firm Asian stocks

The market may open higher on firm Asian stocks which rose after US stocks settled higher on Monday, 19 July 2010. On the domestic front, good corporate earnings reported by India Inc so far, revival in monsoon and foreign fund buying may further support sentiment. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could gain 22 points at the opening bell.



Most Asian stocks rose on Tuesday as banks and resource companies got support from Wall Street gains overnight. The key benchmark indices in Hong Kong, China, Taiwan and Indonesia were up by 0.15% to 1.28%. But, the key benchmark indices in South Korea and Japan fell by between 0.27% to 1.2%.

US stocks rose on Monday, spurred by optimism ahead of earnings from key technology companies and after Dow component Boeing announced strong orders. The Dow Jones Industrial Average added 56.53 points, or 0.56% to 10,154.43. The Standard & Poor's 500 Index rose 6.37 points, or 0.60% to 1,071.25. The Nasdaq Composite Index gained 19.18 points, or 0.88% to 2,198.23.

Back home, a committee set up by the stock market regulator Securities & Exchange Board of India (Sebi) has recommended major changes in the existing law governing substantial acquisition of shares and takeovers. The committee headed by C. Achuthan has recommended an increase in the acquisition threshold for the initial trigger of an open offer from the current level of 15% to 25% of the voting capital of a listed company. While no change has been recommended in the annual creeping acquisition limit of 5%, the committee has recommended that creeping acquisition be permitted only to acquirers who already hold more than 25% of the voting capital, subject to the aggregate post-acquisition shareholding not exceeding the maximum permissible non-public shareholding.

The committee has recommended that an open offer should be made for all the shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small. The exception to this rule is the size of an open offer where the same is voluntary in nature. The current regulations mandate a minimum offer size of only 20%.

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%.

On the corporate front, aggregate results of 146 companies showed net profit rose 29.1% to Rs 9973 crore on 15.5% rise in sales to Rs 61634 crore in Q1 June 2010 over Q1 June 2009.

The monsoon activity revived on Monday, 19 July 2010, with many parts of the country receiving good rains, raising the prospects of a strong harvest. The Southwest monsoon was active over Sub-Himalayan West Bengal & Sikkim, Bihar, Uttar Pradesh and Uttarakhand during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Monday, 19 July 2010.

The IMD expects fairly widespread rain/thundershowers over northeastern states and Sub-Himalayan West Bengal & Sikkim, western Himalayan region and indo Gangetic Plains, in the near term. It also expects widespread rain/thundershowers over the west coast. It expects scattered rainfall activity over central and adjoining east India during next 48 hours and increase thereafter. The IMD expects fairly widespread rainfall over central and east India, west coast, along foothills of Himalaya and northeastern states over the next few days.

Weak monsoon rains in past week will not significantly hurt crop output in the country and the weather outlook is encouraging, Farm Minister Sharad Pawar said on Friday, 16 July 2010. Monsoon rains were 24% below normal in the week ended 14 July 2010. Out of 36 meteorological sub-divisions, rainfall was excess in 8, normal in 4, deficient in 19 and scanty in 5 sub-divisions during the week. Bihar, east Madhya Pradesh, Chhattisgarh, Vidarbha, Andhra Pradesh, Tamil Nadu and Sub- Himalayan West Bengal & Sikkim received good rainfall during the week.

The cumulative seasonal rainfall for the country as a whole during this year's monsoon upto 15 July was 14% below the long period average (LPA). Out of 36 meteorological subdivisions, the rainfall has been excess over 6, normal over 16 and deficient in 14 sub-divisions.

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 registered their third decline in four days on Monday, 19 July 2010 as most Asian stocks fell. The BSE 30-share Sensex fell 27.40 points or 0.15% to 17928.42 on Monday.

As per provisional figures on NSE, foreign funds bought shares worth Rs 153.79 crore and domestic funds sold shares worth Rs 261.30 crore on Monday.

Foreign funds have made substantial purchases of Indian stocks this month. Foreign funds have bought Indian equities worth a net Rs 5218.84 crore this month so far, till 19 July 2010, as per data from the stock exchanges. Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010.

Domestic funds have sold shares worth a net Rs 2620.18 crore this month so far, till 19 July 2010. They had sold equities worth a net Rs 4777.05 crore in June 2010.