Market set for buoyant start on strong global cues

The market is headed for an upbeat start as Asian markets edged higher after an overnight rally in US markets. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could rise 5 points at the opening bell. The key benchmark indices – the BSE Sensex and NSE Nifty may hit psychological levels of 20,000 and 6,000 respectively with foreign institutional investors' buying spree and higher Q2 advance tax payments from frontline companies boosting sentiment.



Asian stocks rose as Taiwanese export orders and US homebuilder Lennar Corp.'s earnings beat estimates. The key benchmark indices in Hong Kong, Indonesia, Japan, China, Singapore, and Taiwan rose by between 0.04% to 0.40%.

US stocks rallied to their highest level in more than four months on Monday, 20 September 2010, as encouraging financial and home-builder earnings boosted confidence in the economic recovery. The Dow Jones Industrial Average surged 145.77 points, or 1.4%, to 10753.62, its highest close since 13 May and its biggest point and percentage gain since 1 September. The Nasdaq Composite index gained 40.22 points, or 1.7%, to 2355.83, its ninth straight winning session. The Standard & Poor's 500-share index rose 17.12 points, or 1.5% at 1142.71.

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 1792.64 crore on Monday, 20 September 2010. Domestic institutional investors dumped shares worth Rs 457.91 crore on that day.

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 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, the BSE 30-share Sensex was up 311.35 points or 1.59% to 19,906.10 its highest closing level since 15 January 2008 and the S&P CNX Nifty was up 95.50 points or 1.62% to 5,980.45, its highest closing level since 15 January 2008. The foreign institutional investors' buying spree and higher Q2 advance tax payments from frontline companies underpinned sentiment.

via CM