Market seen halting seven-day rally on weak Asian stocks; RBI policy review in focus

The market is headed for a negative start on profit booking after a seven-day solid rally which pushed the key benchmark indices to 32-month highs. But the downside may be capped on sustained buying by foreign funds and higher advance tax paid by prominent Indian companies. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could fall 16.50 points at the opening bell.



All eyes on the Reserve Bank of India (RBI) mid-term monetary policy review at 12:00 IST. The RBI is seen raising short-term interest rates by 25 basis points as inflation remains above RBI's comfort level.

The government will unveil data on some wholesale price indices for the year through 4 September 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

Asian markets were trading lower Thursday as resource sector stocks declined in the wake of lower commodity prices. The key benchmark indices in Indonesia, Hong Kong, Singapore, South Korea, Taiwan and China were down by between 0.08% to 0.91%

But, Japanese exporters continued to benefit from a weaker yen after Japanese authorities' currency market intervention Wednesday. The Nikkei 225 index rose 0.3%.

Trading in US index futures indicate that the Dow could shed 27 points at the opening bell on Thursday, 16 September 2010

US stocks responded well on Wednesday to two manufacturing reports and news that import prices increased for the second consecutive month in August. The Dow Jones industrial average rose 46.24 points, or 0.44%, to 10,573. The Standard & Poor's 500-stock index rose 3.97 points, or 0.35%, to 1,125.07, and the Nasdaq Composite index advanced 11.55 points, or 0.5%, to 2,301.32.

Closer home, India's industry began the second quarter on a strong footing, clocking 13.8% growth in July 2010, data late last week showed. 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%

Going ahead, good monsoon rains this season will raise farm output, boost rural incomes and lower food inflation. 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.

Foreign institutional investors (FIIs) are in a buying spree in India. As per provisional figures, FIIs bought shares worth Rs 2214.99 crore on Wednesday, 15 September 2010. Domestic institutional investors sold shares worth Rs 909.96 crore on that day.

FII inflow in September 2010 totaled Rs 8939.10 crore (till 14 September 2010). FIIs had bought equities worth Rs 11687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 68320.80 crore (till 14 September 2010).

The ke benchmark indices gained for the seventh straight day on Wednesday, 15 September 2010, on reports that prominent Indian firms such as Reliance Industries, HDFC, State Bank of India, Hindalco Industries and ICICI Bank, have paid higher advance tax in Q2 September 2010. Data showing heavy buying by foreign funds recently and good monsoon rains in the current monsoon season, underpinned sentiments. The BSE 30-share Sensex jumped 155.05 points or 0.8% to 19,502.11, its highest closing level since 17 January 2008. The S&P CNX Nifty jumped 65.40 points or 1.13% at 5,860.95, its highest closing level since 17 January 2008.