Market seen extending Tuesday's slide on weak global cues

The market is likely to open lower, extending Tuesday's 0.92% fall, on weak global cues. Asian markets declined today after an overnight tumble in US stocks on fears banks might be on the hook for billions of dollars in souring mortgage bonds. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could fall 25.50 points at the opening bell.



Investors are keenly watching Q2 September 2010. The initial batch of Q2 September 2010 results has been strong. 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.

Ashok Leyland, Canara Bank, Kotak Mahindra Bank, Power Grid Corporation, and Yes Bank among others will unveil their June-September 2010 quarter earnings today.

Most Asian markets edged lower on Wednesday, 20 October 2010, after China, the world's fastest-growing major economy, unexpectedly raised its lending and deposit rates.

The key benchmark indices in China, Japan, Singapore, Indonesia and Hong Kong were down by between 0.81% to 2.18%. But, the key benchmark indices in South Korea and Taiwan rose 0.31% and 0.18% respectively.

China's central bank on Tuesday, 19 October 2010 raised one-year lending and deposit rate by 25 basis points, boosting borrowing costs for the first time since 2007. Policy makers are trying to curb lending and prevent an asset-price bubble in a country that surpassed Japan this year as the world's second- largest economy.

US stocks posted their biggest loss in two months on Tuesday, 19 October 2010 on fears banks might be on the hook for billions of dollars in souring mortgage bonds.

The Dow Jones industrial average dropped 165.07 points, or 1.48%, to 10,978.62. The Standard & Poor's 500 Index lost 18.81 points, or 1.59%, to 1,165.90 and the Nasdaq Composite index fell 43.71 points, or 1.76%, to 2,436.95.

Back home, 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.

Divestment secretary Sumit Bose on 19 October 2010, said the government will start the process for appointing bankers for follow-on public offer of refiner Indian Oil Corporation (IOC) within a few weeks. As per media reports, IOC's follow-on public offer could total as much as Rs 19000 crore. Bose said the government is targeting shares sales for IOC and state-run explorer Oil and Natural Gas Corp in the March 2011 quarter.

The initial public offer of state-run Coal India was subscribed 1.71 times on day two of the issue on 19 October 2010. The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India.

Coming back to stocks, foreign funds have made heavy purchases of Indian equities this year. Net equity inflow in 2010 now stands at a record $23.69 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.

Foreign funds bought shares worth a net Rs 107.12 crore on Tuesday, 19 October 2010, as per the provisional data from the stock exchanges. Domestic funds bought shares worth a net Rs 240.70 crore on that day.

Higher inflation in September 2010 has raised the chances of a rate hike at the central bank's next policy review on 2 November 2010. The wholesale-price index rose 8.62% in September 2010 from a year earlier, higher than the annual rise of 8.5% in August 2010, government data showed on Friday, 15 October 2010. The annual reading for July 2010 was upwardly revised to 10.31%. The Reserve Bank of India (RBI) next reviews monetary policy on 2 November 2010.

A separate data showed the food inflation rose marginally to 16.37% for the week ended 2 October 2010, on the back of higher prices of cereals, fruits, select vegetables and milk. Food inflation was at 16.24% for the week ended 25 September 2010.

Customs, Central Excise and Service Tax revenue collections at all India level rose 44.4% to Rs 150686 crore during April-September 2010 as compared to corresponding period in previous year, data released on 13 October 2010 showed.

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.

The Reserve Bank of India (RBI) governor D Subbarao on Friday, 15 October 2010, said the RBI was watching the exchange rate situation and will intervene in the forex market if inflows are lumpy and volatile. India must manage capital inflows so that it can fund its current account deficit while at the same time not harming exports, Deputy Governor Subir Gokarn had said on Thursday 14 October 2010. The rupee hit a 25-1/2-month high above 44 per dollar on Friday, 15 October 2010.

"The Coal India IPO may add pressure on liquidity at least temporarily, so it is something that we will look at and if the circumstances warrant, we will think about responding," Gokarn said late last week.

The key benchmark indices tumbled in late trade on Tuesday, 20 October 2010 after a strong start, an exact opposite movement to that witnessed on Monday, 18 October 2010. The BSE 30-share Sensex lost 185.76 points or 0.92% to 19,983.13 and the S&P CNX Nifty was down 48.65 points or 0.80% to 6,027.30.

The stock exchanges had kicked-off the 15-minute ‘pre-open session' from Monday, 18 October 2010. In a pre-open session, the first eight minutes are reserved for order entry, modification and cancellation. The next four minutes were set aside for order matching and trade confirmation. The remaining three minutes will facilitate the transition from call auction to normal open session.