Market may surge at open on firm global stocks

The market may surge on firm global stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could gain 67.50 points at the opening bell. The government will unveil data on some wholesale price indices for the year through 26 June 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, FMCG major Hindustan Unilever stock turns ex-dividend today. The company had announced dividend of Rs 3.5 per share for the financial year 2010.

Mahindra & Mahindra stock turns ex-dividend today. The company had announced dividend of Rs 9.5 per share for the year ended March 2010.

Bajaj Auto stock turns ex-dividend today. The company had announced dividend of Rs 40 per share for the year ended March 2010.

Asian stocks surged on Thursday as US retail sales grew at the fastest pace in four years and as investors speculated European banks will pass stress tests. The key benchmark indices in China, Hong Kong, Indonesia, Taiwan, Singapore, Japan and South Korea rose by between 0.02% to 2.67%.

US stocks logged their best one-day gain in about six weeks on Wednesday, 7 July 2010 after a bullish forecast from financial company State Street Corp fueled optimism about the coming earnings season and helped the S&P 500 break above a major resistance level. The Dow Jones Industrial Average rose 274.66 points, or 2.82% to 10,018.28. The Standard & Poor's 500 Index gained 32.21 points, or 3.13% to 1,060.27. The Nasdaq Composite Index advanced 65.59 points or 3.13% to 2,159.47.

A retail trade group said sales were growing at the fastest pace since 2006, easing concern that a slump in consumer confidence will scuttle the economic recovery.

Back home, the stock market regulator Securities and Exchange Board of India (Sebi) on Wednesday relaxed the exposure margin requirement for stock derivatives, based on the feedback received from market participants. Sebi issued a circular saying that the exposure margin would be higher of 5% or 1.5 times the standard deviation of the notional value of the gross open position in single stock futures and gross short open position in stock options in a particular underlying.

The revised exposure margin requirement would be effective from 15 July 2010. The exposure margin requirement was similar prior October 2008, after which Sebi increased the exposure margin requirement to higher of 10%, or 1.5 times the standard deviation, to promote market safety and safeguard investor interest.

The next major trigger for the market is Q1 June 2010 results of India Inc, which will start trickling in from the second week of July 2010. 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.

As far as the IT sector is concerned, the focus is on whether the IT bellwether Infosys revises its annual guidance when it announces the first quarter results on 13 July 2010. The IT bellwether will issue guidance for the second quarter ending September 2010 at the time of announcing the first quarter results.

Investors are also closely watching the progress of the monsoon rains. According to reports, monsoon rains have covered the entire country. Rains have revived after weak monsoon last month. Crop planting suffered last month as rainfall was 16% below normal, but rainfall deficit for the country as a whole has narrowed down to 11% for the period 1 June -6 July after heavy rains.

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.

The Reserve Bank of India (RBI) on Friday, 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, thecentral bank said. The growth projection will be reviewed in the first quarter review on 27 July 2010, RBI said.

Analysts expect another 25 basis points rate hike by the central bank at its quarterly review on 27 July 2010.

The key benchmark indices registered their fourth decline in five trading sessions on Wednesday, 7 July 2010, as weak global stocks weighed on investor sentiment. The BSE 30-share Sensex fell 143.46 points or 0.81% at 17,471.03.

As per provisional figures on NSE, foreign funds sold shares worth Rs 49.24 crore and domestic funds bought shares worth Rs 134.69 crore on Wednesday.