Market may open on a positive note

The market may open higher if trading of S&P CNX Nifty futures on the Singapore stock exchange is any indication. It indicated that the Nifty could gain 14 points at the opening bell.



Asian stock markets were mixed on Friday as a strong yen dragged on Japanese shares and uncertainty clouded sentiment ahead of a key US jobs report due later in the global day. The key benchmark indices in Taiwan, South Korea, Japan and Indonesia fell by between 0.39% to 0.91%. But, the key benchmark indices in China, Hong Kong and Singapore rose by between 0.09% to 2.36%.

Back home, finance Minister Pranab Mukherjee said on Thursday global tensions over currencies should be resolved through consensus-building negotiations. "With regard to currency valuation, my approach is that we should engage the countries in negotiation and try to build up a consensus through which the matter can be resolved," Mukherjee said in Washington on the sidelines of the IMF and World Bank meetings.

While emerging market economies have voiced concerns over the surge in capital flows that is driving up their currencies, India has said there is no need to intervene in the foreign exchange market or cap foreign portfolio inflows.

Foreign funds continue to aggressively mop up Indian stocks. As per provisional figures on BSE, foreign institutional investors (FIIs) bought shares worth Rs 1182.91 crore on Thursday, 7 October 2010.

Net equity inflow in 2010 now stands at a record $21.03 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 to Rs 16000 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.

Reserve Bank of India deputy governor Subir Gokarn on Tuesday, 5 October 2010, said the central bank is considering measures to deal with an influx of foreign fund flows. A rising rupee is a bad news for exporters, particularly the labour-intensive segments such as textiles and leather. The government has recently extended sops to some of the labour intensive export sectors.

On Monday, 4 October 2010, Finance Minister Pranab Mukherjee said there was no need to intervene in the foreign exchange market or cap foreign portfolio inflows. "As long as the capital flows are in excess of the current account deficit the pressure to appreciate will continue and it could potentially disrupt," RBI's Gokarn said on Tuesday.

India requires sustained foreign investment to plug its widening current account deficit, which has been worsened by a yawning trade deficit.

Mukherjee said on Thursday, 7 October 2010, that huge surpluses in some countries and large deficits in others are "unsustainable" and should be addressed in multilateral discussions. He also called for an early conclusion to the stalled Doha Round of world trade talks.

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). The Q2 September 2010 earnings season kick-starts next week.

The International Monetary Fund (IMF) on Wednesday, 6 October 2010, raised its India growth forecast for 2010. Indian economy will grow 9.7% in 2010, up from July forecast of 9.4%, the IMF said. IMF has forecast 8.4% growth for India in 2011. The world economy, led by emerging markets, is forecast to grow by 4.8% in 2010 and 4.2% in 2010 and a sharper global slowdown is unlikely, the IMF said.

Annual food inflation eased in late September 2010 on improved supplies, which could soothe the Reserve Bank of India's concerns high food prices could spill over to other parts of the economy. The food price index rose 16.24% while the fuel price index climbed 10.73% in the year to 25 September 2010, government data released today, 7 October 2010, showed. In the prior week, annual food and fuel inflation stood at 16.44% and 10.73% respectively.

The primary articles index was up 18.53% in the latest week compared with an annual rise of 18.31% in the previous week, both under a new series of data with a different base year of 2004-05, new components and weightings. The wholesale price index, the most widely watched gauge of prices in India, rose 8.5% in August 2010.

Profit taking after recent strong gains pulled the key benchmark indices more than 1% lower on Thursday, 7 October 2010, in what was a choppy trading session. The BSE 30-share Sensex fell 227.76 points or 1.11% to 20,315.32.