Market may extend last two days' gains on firm Asian stocks; food inflation data eyed

The market may edge higher for the third straight day, tracking gains in Asian stocks. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could gain 21 points at the opening bell.



Cipla turns ex-dividend today, 3 September 2010, for the payment of special interim dividend of 80 paise per share for the year ending March 2011 (FY 2011).

On macro front, the government will unveil data on some wholesale price indices for the year through 21 August 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today. The weekly data is delayed by one day, as Thursday, 2 September 2010, was a government holiday due to the Janmashtami festival.

Most Asians rose on Friday, 3 September 2010, as investors took heart from improving US housing and jobs data amid lingering worries over the pace of the global economic recovery. The key benchmark indices in Hong Kong, Indonesia, South Korea, Taiwan, Singapore and Japan were up by between 0.13% to 1.15%. But, China's Shanghai Composite fell 0.16%.

South Korea's central bank revised down the nation's second-quarter economic growth rate Friday, as construction investment was less than previously thought. The Bank of Korea said real gross domestic product rose 1.4% during the quarter, compared to an initial estimated growth of 1.5% made in July.

US stocks rose on low volume on Thursday, 2 September 2010, as data showed improvement in housing and job market a day ahead of the critical monthly payrolls figures. The Dow Jones Industrial Average added 50.63 points, or 0.49% to 10,320.10. The Standard & Poor's 500 Index rose 9.81 points, or 0.91% to 1,090.10. The Nasdaq Composite Index gained 23.17 points, or 1.06% to close at 2,200.01.

Data from the National Association of Realtors showed pending home resales rose unexpectedly in July 2010 and a separate report showed new claims for unemployment insurance fell for a second straight week.

The European Central Bank held interest rates at a record low on Thursday, 2 September 2010, and extended its liquidity safety-net in response to a lopsided recovery and worries about vulnerable banks. The ECB also raised growth forecasts for this year and next but ECB President Jean-Claude Trichet said while recent economic data had been stronger than expected, recovery would occur "at a moderate pace with uncertainty still prevailing".

The ECB extended its commitment to provide unlimited one-week and one-month funding until at least 18 January 2011. It will also offer unlimited funds at its three-month tenders until at least the end of this year.

Closer home, exports rose for the ninth straight month in July 2010, growing an annual 13.2% to $16.24 billion, government data released on 1 September 2010 showed. Imports for the month rose 34.3% to $29.17 billion, widening the country's trade deficit to $12.93 billion. Exports during the April-July period rose 30.1% to $68.63 billion.

The trade deficit edged back into double digits in April 2010 after averaging $9.1 billion in Q4 March 2010 and has remained elevated since then. Latest data shows the gap stood at $12.93 billion in July 2010, highest since September 2008 and widening further from $10.55 billion in June 2010.

The gross domestic product (GDP) grew 8.8% in Q1 June 2010, data released by the government on Tuesday, 31 August 2010, showed. The manufacturing sector grew 12.4%, mining sector expanded 8.9%, construction sector grew 7.5%, and farm sector expanded at 2.8%. Output in the combined sectors -- trade, hotels, transport and communication, jumped 12.2%.

The robust growth bolsters the case for further interest rate increases, and analysts anticipate a 25-basis point rate rise at a 16 September 2010 Reserve Bank of India (RBI) policy review.

The consumer price index (CPI) rose 11.25% in July 2010, slower than an annual rise of 13.73% a month ago, data early this week showed.

The HSBC Markit Purchasing Managers' Index, based on surveys of 500 Indian companies, fell to 57.25 in August 2010 from 57.6 in July 2010, but strength in new orders helped the index remain well above the 50 mark that divides growth from contraction. The manufacturing PMI had edged up to 57.6 in July 2010 from 57.3 in June 2010, when it slipped from a multi-year high.

The new orders index was 61.99 in August 2010, down from 62.82 in July 2010. The survey showed that output prices rose at their slowest rate in 10 months in August 2010, while the input price index rose for the second consecutive month.

HSBC is expected to unveil the services sector PMI for August 2010 any time now. The index, which shows business activity in the services sector, had eased to 61.7 in July 2010 from 64 in June 2010.

The key monsoon rains were 16% above normal in the past week, compared with 29% above normal in the previous week, the weather office said on Thursday, 2 September 2010. The weekly reading reflects good showers over most parts of the country, except the eastern region, where the seasonal rains were poor. Cumulative rainfall since 1 June 2010 was 1% below normal, it said.

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.

Coming back to stocks, the key benchmark indices eked out small gains in volatile trade on Thursday, 2 September 2010, tracking gains in Asian stocks. The BSE 30-share Sensex rose 32.44 points or 0.18%.

As per provisional figures on NSE, foreign funds bought shares worth Rs 82.31 crore and domestic funds sold shares worth Rs 118.28 crore on Thursday.