Market may extend recent losses on weak global cues; industrial production data eyed

The market may extend last two days' losses on weak global stocks. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could fall 41 points at the opening bell. On the macro front, the government will announce industrial output data for the month of June 2010 today, 12 August 2010. The government will unveil data on some wholesale price indices for the year through 31 July 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.



Tata Power Company, State Bank of India and Tata Steel announce their Q1 result today.

Mahindra & Mahindra has been picked as the preferred bidder to buy South Korea's Ssangyong Motor in a deal estimated at up to $500 million, Ssangyong said on Thursday.

Asian stocks dropped, extending a global rout as concern the world recovery is faltering spurred demand for safe assets. The key benchmark indices in Singapore, China, Hong Kong, Taiwan, Indonesia, Japan and South Korea were down by between 0.03% to 2.02%.

South Korea's central bank left its key interest rate unchanged Thursday amid slowing economic growth and worries about inflation, a month after raising rates from a record low. The Bank of Korea announced that it kept the benchmark seven-day repurchase rate at 2.25% at a monthly monetary policy meeting.

US stocks erased the year's gains in the broadest sell-off in a month-and-a-half on Wednesday, 11 August 2010, as fears of sustained global economic stagnation caused investors to flee to safer assets. The sell-off caused following the Federal Reserve's bleaker assessment of the US economy on Tuesday, 10 August 2010, when the US central bank also said at a regular policy meeting on interest rates that it would take steps to hold down borrowing costs. The Dow Jones Industrial Average was down 265.42 points, or 2.49% at 10,378.83. The Standard & Poor's 500 Index was down 31.59 points, or 2.82% at 1,089.47. The Nasdaq Composite Index was down 68.54 points, or 3.01% at 2,208.63.

The latest data showed the US trade deficit had widened in June to its highest level in 20 months as exports fell.

Back home, the Indian government early this week relaxed the requirement of a minimum 25% public shareholding for listed state-run firms. It may be recalled that the government in early June 2010 had announced changes in the Securities Contracts (Regulation) Rules 1957, so as to ensure that all listed companies maintain a minimum public float of 25%. Existing listed companies having less than 25% public holding have to reach the stipulated level by an annual addition of not less than 5% to public holding, the government had said at that time. The new rule had raised concerns there will be a deluge of share sales from government-owned firms to meet the minimum 25% public shareholding requirement.

As per the relaxed norms, listed state-owned companies that have less than 10% public stake will have to reach that threshold over a period of three years. The modified rules also give a breather to the private sector companies. While they will have to comply with the minimum 25% public float within three years, they now have flexibility in how the limit is reached i.e. the requirement of a minimum annual 5% increase has been scrapped.

On the corporate front, the combined net profit of a total of 2,649 Indian companies fell 9.2% to Rs 62,637 crore on 20.7% rise in sales to Rs 7,69,376 crore in Q1 June 2010 over Q1 June 2009.

Analysts expect the Reserve Bank of India to raise interest rates by 25 basis points at a mid-quarter monetary policy review on 16 September 2010, to rein in inflation and inflation expectations. The latest data showed the food price index rose 9.53% in the year to 24 July 2010 while the fuel price index climbed 14.26%. Food inflation eased from the week-ago figure of 9.67% and fuel inflation also eased from the previous week's reading of 14.29%. The primary articles index rose 14.36%, compared with the week-ago reading of 14.5%.

The Reserve Bank of India (RBI) at its Q1 monetary policy on 27 July 2010 raised a key lending rate by 25 basis points to curb surging inflation. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations, the RBI said at that time. The RBI also signaled its strong preference for tight liquidity, saying it would ensure that excess liquidity in the system doesn't dilute the effectiveness of policy-rate actions.

Meanwhile, a further improvement in monsoon rains has accelerated kharif planting. The total area brought under the crops is estimated to be higher than last year's level by good 8.4%, reports suggest. The overall rainfall in the whole country was 16% above normal in the week ended 4 August 2010.

The overall kharif prospects remain bullish as 85% of the country's total area has received normal or above normal rainfall, reports suggest. The area coverage is more than last year in the case of all crops, including rice, coarse cereals, pulses, oilseeds, sugarcane, cotton and jute, reports suggest. The crop stand is reported to be good and so far there has been no report of any major attack of disease or pests. Though white fly pest has appeared on cotton in some pockets of Punjab and Rajasthan, but the incidence is below the threshold level till now in most cases.

The improvement in rainfall has also resulted in a spectacular improvement in the water stock in reservoirs, reports suggest. The total water storage in the 81 major reservoirs stood at 52.09 billion cubic metres (BCM) as on 5 August 2010, against 28.65 BCM a fortnight ago. The present storage is a mere 6% short of normal, against 35% a fortnight ago, reports suggest. However, the water balance is still worrisome in reservoirs in the eastern region where the monsoon is yet to pick up full momentum.

The cumulative rainfall during the period from 1 June 2010 to 11 August 2010 was 4% below normal. Rainfall over the country as a whole for the second half (August to September) of the 2010 southwest monsoon season is likely to be normal, according to the India Meteorological Department (IMD). Quantitatively, rainfall for the country as a whole during the period August-September 2010 is likely to be 107% of long period average (LPA) with a model error of plus/minus 7%, according to the weather office.

The southwest monsoon activity was subdued over the country during the past 24 hours, the IMD said in its daily update on Wednesday 11, August 2010. The weather office expects fairly widespread rainfall with isolated heavy fall over western Himalayan region, west coast and Lakshadweep over the next few days. The IMD expects fairly widespread rainfall to continue over central and east India in the near term.

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.

Weak European stocks and a sharp decline in US index futures hit sentiment as Indian stocks declined for the second day in a row on Wednesday, 11 August 2010. The BSE 30-share Sensex fell 149.80 points or 0.82% to 18,070.19.

As per provisional figures released by the stock exchanges, foreign funds on Wednesday, 11 August 2010, sold shares worth Rs 85.81 crore. Domestic funds bought shares worth Rs 23.50 crore on that day.

Foreign funds bought equities worth a net Rs 3797.83 crore in the first few trading days this month, till 11 August 2010, absorbing selling of Rs 1692.30 crore from domestic funds, as per data from the stock exchanges.

Foreign funds had bought shares worth a net Rs 8320.50 crore in July 2010, absorbing selling by domestic institutional investors. Domestic funds sold shares worth a net Rs 6323.13 crore in July 2010.

Foreign funds had pumped in Rs 7713.97 crore in equities in June 2010, absorbing selling by domestic funds in that month. Domestic funds had dumped shares worth a net Rs 4777.05 crore in June 2010.