Market seen opening lower on weak global cues

The market is likely to open lower on weak global cues. Asian stocks fell after the US Federal Reserve Chairman Ben Bernanke said the US economic outlook was unusually uncertain. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could fall 21.50 points at the opening bell. Volatility may rise as traders rollover positions in the derivatives segment from July 2010 series to August 2010 series ahead of the expiry of the near-month July 2010 contracts next Thursday, 29 July 2010.



On the macro front, the government will unveil data on some wholesale price indices for the year through 10 July 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

The key near term event to watch out for is the central bank's quarterly policy review on 27 July 2010. Analysts expect another 25 basis points rate hike aimed at anchoring inflation expectations. 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 was a part of the calibrated exit from the expansionary monetary policy.

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, the combined net profit of a total of 243 companies rose 32.30% to Rs 13632 crore on 18.70% rise in sales to Rs 84923 crore in Q1 June 2010 over Q1 June 2009.

ITC, ACC, Ambuja Cements, Bajaj Auto, Dr Reddys Labs, Idea Cellular, Punjab National Bank, among others will declare April-June quarter results today, 22 July 2010.

State Bank of India (SBI) has reportedly hit the overseas debt markets to raise funds. The size of the medium term notes, having a tenure of five years, to be raised by the bank may be somewhere between $500 million and $1.5 billion. The fund would meet the overseas lending requirement of the bank.

DLF's board may consider on 28 July 2010, issuing shares by a unit, DLF Brands, to a group company of its founders or any other strategic investor. DLF Brands is the retail arm of the company. The company did not give details. DLF will also report its quarterly results on 28 July 2010.

Oil and Natural Gas Corporation (ONGC)'s head R.S. Sharma was quoted by the media as saying that the company is interested in buying BP Plc's stake in Vietnam project.

Meanwhile, the goods and services tax (GST), which is to replace the existing value added tax (VAT), service tax, excise duties and central sales tax among others, will be in place from 1 April 2011. Reports indicated that the Centre and states on Wednesday, 21 July 2010 arrived at a broad consensus on rolling out independent India's biggest tax reforms that will simplify the manner in which corporates, small enterprises and traders will be levied taxes on goods and services. The new indirect tax reform is to streamline the movement of goods and services across India with a single tax structure.

Most Asian stocks fell after the US Federal Reserve Chairman Ben Bernanke said the US economic outlook remains unusually uncertain. The key benchmark indices in Hong Kong, Indonesia, South Korea, Japan, Taiwan were down by 0.04% to 0.68%. But, Key benchmark indices in Singapore and China rose 0.17% and 0.09% respectively.

US markets edged lower on Wednesday, 21 July 2010 after Federal Reserve Chairman Ben Bernanke confirmed investors' fears that the economy has weakened. Bernanke told a congressional committee that the economy is "unusually uncertain." The Dow Jones industrial average fell 109.43, or 1.1%, to 10,120.53. The Standard & Poor's 500 index fell 13.89, or 1.3%, to 1,069.59 and the Nasdaq composite index fell 35.16, or 1.6%, to 2,187.33.

In economic data, US mortgage applications jumped last week and demand for home refinancing loans hit the highest level in 14 months, according to the mortgage bankers association.

Back home, in a sharp variation from International Monetary Fund's upbeat assessment of growth prospects for India in 2010, the Asian Development Bank (ADB) on Tuesday retained its growth estimate for India at 8.2%. The ADB also stuck to its China's forecast at 9.6% but marginally revised that for the Asian region to 7.9%. International Monetary Fund (IMF) has upgraded India's growth projection to as high as 9.5% from 8.8% estimated earlier.

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%.

Investors are closely monitoring the progress of the monsoon rains. The southwest monsoon was vigorous over Sub-Himalayan West Bengal & Sikkim and active over Bihar, West Uttar Pradesh, Uttarakhand, Himachal Pradesh, Punjab, Konkan & Goa, Vidarbha, Telangana, Coastal & South Interior Karnataka and Kerala during past 24 hours, the India Meteorological Department (IMD) said in its daily update on Wednesday, 21 July 2010. The weather office expects fairly widespread rainfall over central, east and northeast India, west coast and along foothills of Himalayas.

The cumulative seasonal rainfall for the country as a whole during this year's monsoon upto 21 July 2010 was 14% below the long period average (LPA).

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 BSE 30-share Sensex rose 99.09 points or 0.55% to 17,977.23 and the S&P CNX Nifty rose 31.35 points or 0.58% to 5,399.35 on Wednesday, 21 July 2010 on firm global stocks.

As per provisional data from the stock exchanges, foreign funds bought equities worth a net Rs 362.44 crore and domestic funds sold shares worth a net Rs 302.68 crore on 21 July 2010.