Market may edge higher on firm Asian stocks

The market may edge higher in early trade tracking firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could gain 21.50 points at the opening bell.

Asian stock markets rose Wednesday as the minutes from the Federal Reserve's latest meeting signaled that the U.S. central bank will soon act to boost growth. The key benchmark indices in China, Hong Kong, Indonesia, South Korea, Singapore and Taiwan rose by between 0.02% to 0.83%.



Sentiment was upbeat across Asia after the minutes from the Fed's meeting on 21 September suggested the U.S. central bank is almost certain to take steps to shore up a recovery in the world's No. 1 economy at its next meeting in early November. The minutes showed the Fed was concerned that the economy was growing slower than it had expected. Fed officials said in the minutes that they were prepared to provide additional relief "before long."

Chinese exports in September rose 25.1% from the year-earlier period, state media reported Wednesday, with the gain below expectations.

Japan's Nikkei Average rose 0.86%. Japanese shares climbed Wednesday in Tokyo as a surprise jump in the nation's August core machinery orders provided a lift to technology and auto shares.

U.S. stocks hit fresh 5-month highs on Tuesday, 12 October 2010 as details from the Fed's latest meeting showed the U.S. central bank may once again flood markets with cheap cash "before long" to further boost growth.

Earning season kickstarted in US. Intel Corp reported stronger-than-expected third-quarter results and a forecast for better sales in the fourth quarter.

Back home, industrial production rose at a much slower-than-expected 5.6% in August 2010 from a year earlier, sharply lower than the previous month's revised 15.2% growth, the latest government data showed. Manufacturing output rose an annual 5.9% in August 2010, lower than a 10.6% rise in August 2009. Industrial production growth for July 2010 was revised upwards to 15.2% from 13.8% earlier.

Output in the mining sector rose 7% verses 11% rise in August 2009 and electricity generation rose just 1% from a 10.6% growth in August 2009. Intermediate goods production rose 10% verses a 10.4% rise in August 2009 and basis goods production rose 3.7% verses a 7.7% rise in August 2009. Capital goods production contracted 2.6% in August 2010 verses a 9.2% growth in August 2009.

Production of consumer goods rose 6.9%, lower than a 10.9% growth in August 2009. Within the consumer goods segment, the consumer durables sector put up a strong showing. Production of consumer durables jumped 26.5% verses a 24.7% growth in August 2009. But, production of consumer non-durables contracted 1.2% verses a 6.1% growth in August 2009.

The government will unveil data on wholesale price index for September 2010 on Friday, 15 October 2010. The wholesale price index, the most widely watched gauge of prices in India, rose 8.5% in August 2010.

Foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $21.85 billion, above last year's $17.45 billion, as per data from the Securities & Exchange Board of India (Sebi). The Sebi data includes FII inflow through primary and secondary market route.

A sizable chuck of FII inflow this year is from India-focused exchange traded funds as well as long-only funds.

But, a section of the market is concerned that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 36000 crore from share sales over the next three to six months. This includes a large initial public offer (IPO) from Coal India this month. The government plans to raise about Rs 15000 crore from divestment of 10% stake in Coal India. The Coal India IPO is billed as the country's largest issue ever. The IPO of Coal India opens for bidding on 18 October 2010 and closes on 21 October 2010.

The government on Tuesday, 12 October 2010, set Rs 225-245 per share price band for the Coal India IPO. Retail investors will get shares at 5% discount on the final issue price to be discovered through the book-building route. The IPO opens for bidding on 18 October 2010 and closes on 21 October 2010. The Indian government is selling roughly 63.16 crore Coal India shares, or 10% of the company.

The next major trigger for the stock market is Q2 September 2010 results. Brokerage earnings estimates will now roll over to FY 2012 (year ending March 2012).

Tier-I IT firms viz. Infosys, TCS, Wipro, and HCL Tech are seen reporting strong earnings growth in Q2 September 2010 as high volumes will boost operating margins. However, the IT sector faces headwind of a firm rupee in Q3 December 2010. The rupee hit a 2-year high against the dollar on Thursday, 7 October 2010. Higher volumes and price hike will aid earnings growth of most auto firms in Q2 September 2010 though analysts will closely eye operating profit margins and outlook on margins in the face of rising metal prices

Banks are seen reporting decent-to-strong earnings growth on the back of pick-up in credit offtake. Manufacturers of base metals are also seen reporting strong Q2 results on the back of higher metal prices. Increase in product prices will offset higher input costs for consumer staples firms in Q2 September 2010. But, cement firms will report dismal results due to a sharp fall in cement prices during the monsoon season.