Market seen opening flat amid mixed global cues

The market is likely to open little changed with lack of clear direction from global markets. Asian markets were trading mixed. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicated that the Nifty could rise 5 points at the opening bell.



Mahindra & Mahindra has reportedly signed a preliminary agreement to buy a controlling stake in Ssangyong Motor Company.

Shares of Mumbai-based realty companies may see action on reports they will get a tax exemption for redevelopment under the Slum Rehabilitation Scheme.

Volatility could spike this week as traders rollover positions in derivatives segment from the August 2010 series to the September 2010 series ahead of the expiry of the near-month August 2010 contracts on Thursday, 26 August 2010.

Amid growing hopes of a bumper kharif harvest thanks to further improvement in monsoon rainfall, worries persist over the unabated poor crop sowing in some parts rain-starved eastern region. Overall, nearly 90% of the total normal kharif acreage has already been seeded till 20 August 2010 and the standing crops are reportedly in good shape. Water status of most reservoirs is also getting better rapidly and is now just three per cent short of normal.

A ray of hope for the drought-hit eastern region has emerged from the India Meteorological Department (IMD) which has predicted widespread showers in eastern Uttar Pradesh, Bihar, sub-Himalayan West Bengal, Sikkim, Assam and Meghalaya in the rest of this month. That will help farmers grow coarse cereals, pulses and fodder to redeem some losses.

The cumulative rainfall during the period from 1 June 2010 to 22 August 2010 was 3% below normal. The Southwest monsoon was vigorous over interior Karnataka and Rayalaseema and active over Assam & Meghalaya, Arunachal Pradesh, Sub-Himalayan West Bengal & Sikkim, Himachal Pradesh, Uttarakhand, Haryana, Chandigarh & Delhi, West Uttar Pradesh, East Rajasthan, Madhya Maharashtra and Coastal Karnataka, the India Meteorological Department (IMD) said in its daily update on Sunday, 22 August 2010.

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 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. If the southwest monsoon for the June-September monsoon season turns out good and if it is well distributed, it will help raise farm output, boost rural incomes and lower food inflation.

Asian stocks were trading mixed on Monday, 23 August 2010. The key benchmark indices in Japan, Singapore, Jakarta and Hong Kong, were down by between 0.13% to 0.42%. The key benchmark indices in Taiwan, South Korea, and China were up 0.11% to 0.92%.

US markets ended on a mixed note on Friday, 20 August 2010, as traders remained concerned over the pace of recovery of the economy after weak data. The Dow Jones Industrial Average shed 57.59 points or 0.56% at 10,213.62. The S&P 500 index lost 3.94 points or 0.37% to 1,071.69. But, the Nasdaq composite index, gaining 0.81 points or 0.04% to 2,179.76.

Back home, foreign funds have made heavy purchases of Indian stocks over the past 2-1/2 months. Foreign funds bought shares worth a net Rs 662.86 crore on Friday, 20 August 2010, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 102.16 crore on that day.

Foreign funds have bought equities worth a net Rs 7028.83 crore so far this month, till 20 August 2010, absorbing selling of Rs 3149.57 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.

The Union cabinet on Friday, 20 August 2010, cleared a revised version of a Bill to govern civil liability in the event of nuclear damage to push forward the process of increasing the share of atomic power in electricity generation. However, the Nuclear Liability Bill faced fresh roadblocks on Sunday, 22 August 2010, with the Bhartiya Janata Part and the Left parties asserting that they would oppose any dilution of the suppliers' liability.

On the macro front, multilateral lender Asian Development Bank may raise inflation forecast for India at its next Economic Outlook slated for 28 September 2010, depending on progress of the monsoon rains. ADB has forecast a 8.2% GDP growth for 2010 and average inflation of 5% for the year.

Data on 19 August 2010 showed the primary articles index rose 14.85% in the year to 7 August 2010, lower than previous week's annual rise of 15.66%. The food price index rose 10.35%, lower than previous week's annual rise of 11.4%, as prices of vegetables, potatoes and onions fell. The fuel price index rose 12.57%, lower than previous week's annual rise of 12.66%.

The liquidity situation in the financial markets has improved, a senior Reserve Bank of India (RBI) official said on Friday, 20 August 2010. The Reserve Bank of India (RBI) is also keeping a close watch on the liquidity situation, said Janak Raj, an adviser at the RBI's monetary policy division.

Chief Statistician T.C.A. Anant on 19 August 2010 said the headline inflation is expected to ease further in coming months. The headline inflation eased in July 2010, fuelling expectations that the central bank may lessen the scale and pace of increase in interest rates.

Saumitra Chaudhuri, a Planning Commission member in charge of economic development recently said inflation has peaked and would start easing at a faster rate from September 2010. The Reserve Bank of India will undertake a mid-quarter monetary policy review on 16 September 2010, as per the schedule. Finance Minister Pranab Mukherjee said this month rising prices were a cost of rapid economic growth.

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.

India needs to channelise more pension and insurance funds into the infrastructure sector, Finance Minister Pranab Mukherjee said in a government statement released on 18 August 2010. India plans to spend $1.5 trillion between 2007 and 2017 to upgrade its infrastructure to support double-digit economic growth rates.

India's exports in July grew an annual 13.2% to $16.24 billion, Trade Secretary Rahul Khullar said on Tuesday, 17 August 2010, the ninth straight month of expansion. Imports for the month rose 34.3% to $29.17 billion, he said.

The industrial output rose 7.1% in June 2010 compared with revised 11.3% rise in May 2010, the latest data showed. Manufacturing grew 7.3%, mining sector grew 9.5%, consumer goods sector rose 8.3%, capital goods sector expanded 9.7% and electricity generation rose 3.5%.

The industrial production growth rate for May 2010 was revised marginally down to 11.3% from 11.5% reported earlier. The growth rate for March 2010 was revised upward to 14.5% from 13.9% reported earlier.

Profit booking pulled the key benchmark indices lower on Friday, 20 August 2010, with weak global cues playing the spoilsport. The BSE 30-share Sensex was down 53.12 points or 0.29% to 18,401.82 and the S&P CNX Nifty was down 9.55 points or 0.17% to 5,530.65