Market seen extending three-day gains

The market is likely to continue to recent upmove following positive global cues after the US Federal Reserve hinted it could take additional measures to stimulate economic growth. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could rise 14 points at the opening bell.



Asian markets were trading higher Wednesday driven by healthcare and finance stocks. The key benchmark indices in Hong Kong, Japan and Singapore and rose by between 0.03% to 0.81%. However Indonesia's Jakarta Composite index fell 0.19%.

US markets ended mixed on Tuesday after the Federal Reserve hinted it could take additional measures to stimulate economic growth. The Dow Jones Industrial Average rose 7.41 points, or 0.07%, to 10761.00, closing at its highest level since May. The Nasdaq Composite fell 6.48 points, or 0.3%, to 2349.35 and the Standard & Poor's 500-share index fell 2.93 points, or 0.3%, to 1139.78.

The Fed concluded its one-day policy meeting without announcing additional steps to boost the recovery. The US central bank kept its key interest rate unchanged yesterday and refrained from expanding its holdings of securities. But its officials signaled they are uncomfortable with the recent low levels of inflation and said they are prepared to take additional action to boost the economic recovery.

Back home, the key benchmark indices rose for the third straight day on Tuesday with BSE Sensex and the S&P CNX Nifty closing above the psychological levels of 20,000 and 6,000 respectively. Firm global stocks, foreign institutional investors' buying spree and robust Q2 advance tax payments from frontline companies underpinned sentiment.

The BSE 30-share Sensex rose 95.45 points or 0.48% to 20,001.55 its highest closing level since 15 January 2008 and the S&P CNX Nifty was up 28.60 points or 0.48% to 6,009.05, its highest closing level since 15 January 2008.

FII inflow in September 2010 totaled Rs 13,738.45 crore (till 20 September 2010). FIIs had bought equities worth Rs 11687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 71824.50 crore (till 16 September 2010).

Global fund tracker EPFR Global on Friday, 17 September 2010, said developing-nation equity funds received inflow of about $3.3 billion in the week to 15 September 2010 as Chinese industrial output gains bolstered sentiment. Inflow into Asia ex-Japan equity funds hit a seven-week high. Flows into India equity funds hit an eight-week high.

Meanwhile, the Union Cabinet on Thursday, 16 September 2010, approved amendments to the Forward Contracts (Regulation) Act 1952, paving the way for the introduction of the Forward Contracts (Regulation) Amendment Bill, 2010 in Parliament. If passed by the both the Houses, it will pave the way for local and foreign institutional investors in commodity futures and bring in new products.

At a mid-term policy review on Thursday, 16 September 2010, the Reserve Bank of India (RBI) signaled that it may be nearing a pause in its current tightening cycle. The central bank said its rate and liquidity actions since October 2009 have been driven by two considerations -- normalisation of the monetary policy stance as the crisis abated and inflation management. The Reserve Bank of India believes that the tightening that has been carried out over this period has taken the monetary situation close to normal, it said. Consequently, the role of normalisation as a motivation for further actions is likely to be less important, the RBI said.

The RBI on Thursday, 16 September 2010 raised its repo rate, or benchmark lending rate, by a quarter point to 6%, at a mid-term monetary policy review. The central bank also hiked the reverse repo rate, or the rate at which it borrows funds, by half a point to 5%. Both these changes will take place with immediate effect.

India's exports grew 22.5% to $16.64 billion in August 2010 over August 2009, while imports rose 32.3% to $29.7 billion data last week showed. As a result, trade deficit, or the difference between exports and imports, widened to $13.5 billion. During the April-August 2010 period, exports posted a growth rate of 28.6% to $85.27 billion over the previous year, while total imports grew by 33.1% to $141.89 billion, according to initial estimates released by the Ministry of Commerce and Industry.

Cumulative rainfall in the country during 1 June to 15 September was 2% above normal, IMD data showed. 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.