Market seen opening higher on positive global cues

The market is likely to see a higher start on positive global cues. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could rise 11 points at the opening bell.



Asian stocks rose on Friday as technology shares gained and the yen weakened, boosting Japan's exporters. The key benchmark indices in Indonesia, Hong Kong, South Korea, Singapore, Japan and Taiwan and were down by between 0.14% to 0.75%. However China's Shanghai Composite slipped 0.33%.

US markets saw mixed trend on Thursday. The Dow Jones Industrial Average rose 22.10 points, or 0.21%, at 10594.83. The S&P 500 slipped 0.41 point, or 0.04%, to 1124.66. and the Nasdaq Composite rose 1.93, or 0.08%, to 2303.25.

Closer home, the Reserve Bank of India (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.

The Reserve Bank of India said that the growth rate indicates that the economic recovery is consolidating and the economy is rapidly converging to its trend rate of growth. Inflation remains the dominant concern in macroeconomic management, it added. The RBI said further rate moves will be based on current and expected macroeconomic conditions.

India's economic expansion will not be impacted by the central bank's decision to hike policy rates, Montek Singh Ahluwalia, deputy chairman of the Planning Commission said on Thursday

With regard to inflation, the central bank said the inflation rates have reached a plateau. However, the inflation rate is likely to remain at unacceptably high level for some months, it added. While prices of food articles, which according to the new series, rose by over 14% in August 2010, are still contributing to the pressure, about two-thirds of the August inflation can be attributed to items other than food articles and products. Notwithstanding slight moderation in August 2010, the headline inflation remains significantly above the trend of 5% to 5.5% in the 2000s, the RBI said in a statement. There is, therefore, need for continued policy response to contain inflation and anchor inflationary expectation, it said.

As regards government finances, the fiscal deficit appears to be conforming to the estimates made in the Union Budget for 2010-11. Higher than expected realisations on 3G and broadband wireless access (BWA) auctions combined with buoyant tax revenues have virtually eliminated the risk of the fiscal deficit overshooting the targeted 5.5%, even after the supplementary demand for grants is taken into account. This will help stabilise market expectations of liquidity and interest rate movements, the RBI said.

The Reserve Bank's 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. Consequently, the role of normalisation as a motivation for further actions is likely to be less important. Current and expected macroeconomic conditions will be the more important considerations going forward. The Reserve Bank of India will continue to monitor these conditions, particularly the price situation, and take further action as warranted, the RBI said in a statement.

Exports grew 22.5% to $16.64 billion in August 2010 over August 2009, while imports rose 32.3% to $29.7 billion. 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.

Coming back to stocks, foreign institutional investors (FIIs) are in a buying spree in India. As per provisional figures, foreign institutional investors (FIIs) bought shares worth a net Rs 1120.03 crore on Thursday, 16 September 2010. Domestic institutional investors dumped shares worth Rs 1105.25 crore on that day.

FII inflow in September 2010 totaled Rs 11299.20 crore (till 15 September 2010). FIIs had bought equities worth Rs 11687.50 crore in August 2010. FII inflow in the calendar year 2010 totaled Rs 70680.90 crore (till 15 September 2010).

Buoyed by earnings growth in banks, financial services and manufacturing firms, Corporate India has paid 15% higher advance tax in the June-September 2010 quarter over the year-ago period. Companies pay advance taxes in four installments throughout the year based on the business they are doing and hence, the advance tax payments made are seen as a barometer of the companies' performance.

The government's indirect tax collections grew 45% to Rs 27,947 crore in August 2010 over August 2009. For the first five months from April 2010 to August 2010 of the current fiscal, the centre's indirect tax collections grew nearly 46% to Rs 1,24,170 crore over the previous year. The centre has targeted indirect tax collections of Rs 3.15 lakh crore for the fiscal year ending March 2011.