Market may extend three-day gains; food inflation data eyed

The market may extend last three days' gains if trading of the S&P CNX Nifty futures on the Singapore stock exchange is any indication. It indicated that the Nifty could gain 18 points at the opening bell. On macro front, the government will unveil data on some wholesale price indices for the year through 28 August 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.



The market remains closed on Friday, 10 September 2010 on account of Ramzan Id.

Data on industrial production for July 2010 will be out on Friday, 10 September 2010. Industrial output rose 7.1% in June 2010, compared with revised 11.3% rise in May 2010.

Asian stock markets turned mixed after advancing in early trade on Thursday, 9 September 2010. The key benchmark indices in Hong Kong, Japan and Singapore were up by between 0.08% to 0.79%. But, the key benchmark indices in South Korea, Taiwan and China were down by between 0.03% to 0.34%.

The Bank of Korea unexpectedly left its benchmark interest rate unchanged amid concerns slowing external demand will hurt exports in Asia's fourth- biggest economy. Governor Kim Choong Soo kept the seven-day repurchase rate at 2.25%, the central bank said in a statement in Seoul today.

In New York overnight, the Dow Jones Industrial Average gained 0.5% to close at 10,387.01. The S&P 500 index rose 0.6% to 1,098.87, while the Nasdaq rose 0.9% to 2,228.87.

Back home, foreign institutional investors (FIIs) are in a buying spree in India. FIIs bought share worth a net Rs 281.96 crore on Wednesday, 8 September 2010, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 98.21 crore on that day.

Foreign funds have shares worth a net Rs 1932.75 crore in the first few days this month, as per data from the stock exchanges. The inflow has reached Rs 21427.85 crore in calendar 2010.

On the macro front, good rains in August 2010 and in the first week of September 2010 has strengthened the optimism about a record kharif harvest this season. Further, the weather office's prediction that the monsoon will not start withdrawing before mid-September 2010 has boosted the outlook for the next rabi as well.

The kharif sowing is more or less over in most of the country, barring some pockets in the east where soil moisture remained inadequate for seeding till the second half of August 2010. Paddy growers in such tracts of Jharkhand, West Bengal and Bihar are now sowing alternative crops like urad, moong, nigerseed and fodder on the advice of agriculture experts and officials of the state agriculture departments, as per media reports.

With 16% above-normal rainfall in the last week of August, the overall deficiency in the season's cumulative monsoon rainfall till 4 September 2010 has shrunk to just 1%, from 5% at July-end and 16% at June-end. The forecast issued by the India Meteorological Department (IMD) projects 15% excess rainfall in September 2010, the last month of the four-month monsoon season (June to September). The rain-starved tract in the north-east is also projected to receive good rainfall till at least 10 September 2010. The cumulative seasonal rainfall in the eastern region as a whole, however, may remain in the deficient domain, according to IMD.

While the traditional high rainfall region in the east and north-east has remained rain deficient in this monsoon this, the usually arid tracts, such as western Rajasthan, Leh and Ladakh in Jammu and Kashmir, Vidarbha, Marathwada, Saurashtra and Kutch, have got excess rainfall in the current monsoon season. This has facilitated extensive sowing of coarse cereals, pulses and cotton in these tracts, as per media reports. High ruling prices of these commodities has also encouraged the farmers to go for these crops.

The good and sustained waterfall since the last week of July, moreover, has refilled most of the reservoirs which were depleted substantially due to last year's drought. According to the Central Water Commission, total water stock in the 81 major reservoirs was 90.777 million cubic metres (BCM) on 1 September 2010. This level is nearly 34% above the last year's corresponding level and 2% above the long period average.

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 managed to end in positive terrain on Wednesday, 8 September 2010, as good monsoon rains this year will raise farm output, boost rural incomes and lower food inflation. The two key benchmark indices -- the barometer index BSE Sensex and the 50-unit S&P CNX Nifty attained their highest closing levels in more than 31 months. The Sensex rose 21.65 points or 0.12% to 18,666.71, its highest closing since 18 January 2008 on Wednesday.