Market may open flat to slightly higher; inflation data eyed

The market may open flat to slightly higher as consolidation may happen after a recent sharp rally over the past few days. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could fall gain 2.50 points at the opening bell.



The government will announce inflation data for August 2010 today. The calculation of inflation will undergo an overhaul when the government releases a new series of wholesale price index for August 2010 today, that will track prices of items such as refrigerators, computers and TV sets to better reflect the changing consumption pattern.

The base year against which price rise is measured is also being advanced by a decade to 2004-05, starting from monthly inflation data for August 2010 to smoothen out the index by reducing fluctuations. The existing series will be restated so that a comparison of the last five years is possible.

Asian stocks were mixed. Japanese shares fell as a stronger yen dented prospects for export earnings. The Nikkei 225 average fell 0.23%. The key benchmark indices in Singapore and South Korea fell by between 0.02% to 0.43%. But, the key benchmark indices in China, Hong Kong and Japan rose by between 0.07% to 0.47%.

Gross domestic product in the 16-nation euro region may increase 1.7% this year instead of the 0.9% projected at the depth of Europe's fiscal crisis in May, the Brussels-based commission said in a report published yesterday.

Back home, the Reserve Bank of India (RBI) is seen raising short-term interest rates by 25 basis points at a mid-term policy review on Thursday, 16 September 2010.

On the macro front, India's industry began the second quarter on a strong footing, clocking 13.8% growth in July 2010. The growth rate, the highest in two months, exceeded market expectations. The growth was driven by a strong showing by the manufacturing sector, particularly the capital goods segment.

Meanwhile, the government revised downwards the industrial production growth for June 2010 to 5.76% from earlier 7.1%

Coming back to stocks, foreign institutional investors (FIIs) are in a buying spree in India. FIIs bought share worth a net Rs 2519.88 crore on Monday, 13 September 2010, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 960.81 crore on that day.

Foreign funds have bought shares worth a net Rs 5440.61 crore in the first few days this month, as per data from the stock exchanges. The inflow has reached Rs 24935.71 crore in calendar 2010.

Good monsoon rains this season will raise farm output, boost rural incomes and lower food inflation. As a result of the intensification of monsoon since the last week of August 2010, the drought-hit areas of the east and the north-east have received adequate moisture to facilitate planting of alternative, short-duration crops, especially of pulses and fodders, in the fields that had remain unsown so far. This is likely to mitigate the losses due to persistent paucity of rains in this region.

Countrywide, the crop coverage this season has been far better compared to not only the rain-starved 2009 but also to the good rainfall year of 2008. The total area sown under kharif crops till the end of August was 8.3 million hectares higher than in 2009 and 1.15 million hectares more than in 2008 when the country had reaped a record kharif foodgrain harvest of 118.14 million tonnes.

There has been a considerable expansion in acreage under those commodities that have witnessed a perceptible spurt in prices, such as pulses, coarse cereals like bajra and maize, and commercial crops like cotton and sugarcane. On other hand, the area planted with rice and oilseed, the commodities whose prices have remained more or less stable, has come down this year by nearly two million hectares and 700,000 hectares, respectively, compared to that in 2008.

The total water stock in the country's 81 major reservoirs has risen by 9 September 2010 to 103.156 billion cubic metres, some 32% higher than last year's corresponding level and 11% above normal for this time of the season. Many dams have their flood gates opened due to unabated water inflows.

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.

Robust July 2010 industrial production growth, good monsoon rains this year, data showing sustained buying by foreign funds and firm global stocks, helped domestic bourses kick off the new trading week with a bang on Monday, 13 September 2010. The two key benchmark indices, the BSE Sensex and the 50-unit S&P CNX Nifty, struck their highest levels in nearly 32 months. The market gained for the fifth straight trading session. The BSE 30-share Sensex jumped 408.67 points or 2.17% to 19,208.33, its highest closing level since 17 January 2008.