Market seen subdued in opening trade

The market is likely is to see a soft start as profit booking might emerge following the recent surge which propelled the key benchmark indices to 32-month highs. Global cues lacked direction. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could fall 13 points at the opening bell.



Asian stocks were trading mixed Monday, 20 September 2010 in light trading. The key benchmark indices in Hong Kong, China, Singapore, and Taiwan rose by between 0.01% to 0.30%. However indices in Indonesia and South Korea declined 0.40% and 0.28% respectively. Japanese markets are closed today for a holiday.

US markets logged small gains on Friday, 17 September 2010, led by technology stocks. The Dow Jones Industrial Average rose 13.02 points, or 0.12%, to 10607.85. The Standard & Poor's 500-share index gained 0.93, or 0.08%, to 1125.59 and the Nasdaq Composite index gained 12.36, or 0.54%, to 2315.61.

The key event to watch out for is US Federal Reserve's monetary policy meeting on Tuesday, 21 September 2010. The Fed policymakers will access whether the US economy needs reinforced monetary crutches. The US central bank has already cut benchmark interest rates to near zero and pumped more than $1.7 trillion into the economy through purchases of Treasury and mortgage-related debt.

Back home, 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 1518.76 crore on Friday, 17 September 2010. Domestic institutional investors dumped shares worth Rs 747.24 crore on that day.

FII inflow in September 2010 totaled Rs 12442.80 crore (till 16 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 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.

Coming back to stocks, Indian stocks resumed their winning ways after a day's pause on Thursday, 16 September 2010 with both the benchmark indices the BSE Sensex and the 50-unit S&P CNX Nifty scaling 32-month closing highs. The BSE 30-share Sensex jumped 177.26 points or 0.91% to 19,594.75, its highest closing level since 17 January 2008 and the S&P CNX Nifty jumped 56.25 points or 0.97% to 5,884.95, its highest closing level since 17 January 2008.