Market may edge higher on firm Asian stocks; food inflation data eyed

The market may edge higher, tracking gains in Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could gain 16 points at the opening bell.



In macro news, the government will unveil data on some wholesale price indices for the year through 9 October 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

Among corporate results, ACC and Tata Consultancy Services (TCS) report earnings today, 21 October 2010.

Most Asian stocks rose on Thursday on growing expectations of more stimulus from the US Federal Reserve, although gains were modest as investors took a cautious stance ahead of critical economic data from China. The key benchmark indices in Hong Kong, Indonesia, Japan and Taiwan rose by between 0.2% to 0.64%. The key benchmark indices in China, Singapore and South Korea fell by between 0.03% to 0.21%.

China is scheduled to release a slew of key economic data later in the day, including economic growth, inflation, retail sales and detailed trade figures.

Wall Street bounced back on Wednesday as a fall in the dollar spurred buying in industrial and commodity-linked shares, while another batch of strong corporate earnings added to gains. The Dow Jones Industrial Average gained 129.35 points, or 1.18% to 11,107.97. The Standard & Poor's 500 Index rose 12.27 points, or 1.05% to 1,178.17. The Nasdaq Composite Index added 20.44 points, or 0.84% to 2,457.39.

Closer home, investors are keenly watching Q2 September 2010. The initial batch of Q2 results announced so far have been good with net profit of 209 companies rising 33% on 21.8% rise in sales in the quarter ended September 2010 over the quarter ended September 2009.

Tier-1 IT firms 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. 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.

Coming back to stocks and market men are worried 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 80000 crore from equity and debt issue over the next three to six months. This includes a large initial public offer (IPO) from Coal India, which is currently open for bidding. In fact, the proposed fund raising exercise would be still higher if Indian Oil Corporation (IOC) hits the market with a follow-on public offer.

Investors have made a beeline for Coal India shares as the initial public offer (IPO) of the state-run coal giant was subscribed nearly 12 times on the last day of the bidding for the issue by qualified institutional bidders (QIBs) on Wednesday, 20 October 2010. Bidding for the Coal India IPO by non-institutional investors, which mainly consists of high networth individuals and corporates, and retail investors ends today, 21 October 2010.

The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India. The government has set Rs 225-245 per share price band for the Coal India IPO, which is billed as the country's largest issue ever.

Foreign funds have made heavy purchases of Indian equities this year. Net equity inflow in 2010 now stands at a record $23.77 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.

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, data showed on Tuesday, 12 October 2010. 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.