Market seen opening firm; Bajaj Auto, HDFC Bank earnings eyed

The market is likely to extend Monday's strong intra-day rebound on positive global cues. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could rise 16 points at the opening bell.

The near term focus of the market is on Q2 September 2010 quarter earnings as brokerage update their earnings estimates to FY 2012 (year ending March 2012) taking into consideration the latest quarterly earning.



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.

Bajaj Auto, HCL Technologies, HDFC Bank, Polaris Software, Greaves Cotton and Container Corporation of India among others will unveil their June-September 2010 quarter earnings today.

Asian markets edged higher on Tuesday, 19 October 2010, after Citigroup reported profit that exceeded analysts' estimates, boosting the outlook for corporate earnings. The key benchmark indices in China, Japan, South Korea, Singapore, Taiwan, Indonesia and Hong Kong were up by between 0.02% to 0.80%.

Data on China's third-quarter gross domestic product and consumer-level price inflation is due on Thursday, 21 October 2010.

US stocks closed higher Monday as investors were encouraged by earnings from Citigroup and a measure of home-builder confidence that topped expectations. The Dow Jones Industrial Average rose 80.91 points, or 0.73%, to 11143.69, its highest close since 3 May 2010. The Nasdaq Composite added 11.89, or 0.48% to 2480.66, while the Standard & Poor's 500-stock index advanced 8.52, or 0.72%, to 1184.71.

The National Association of Home Builders (NAHB) said its housing-market index rose three points to 16 in October 2010, the first improvement in the index in five months. The index measures builder confidence for sales prospects of new, single-family homes. The NAHB report boosted expectations for data on housing starts and building permits due later in the global day today, 19 October 2010.

Back home, 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 80000 crore from share sales over the next three to six months. This includes a large initial public offer (IPO) from Coal India, which is current open for bidding.

The initial public offer of state-run Coal India was subscribed 34% on the first day of the issue on 18 October 2010, data on NSE website showed. The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India.

Meanwhile, as per an industry body survey, the business confidence of India Inc. for the October-December 2010 quarter declined on concerns such as inflation and high interest rates. The Confederation of Indian Industry (CII) 74th Business Outlook Survey showed the industry lobby's business confidence index for October-December 2010 fell by 1.4 points to 66.2 as compared to an increase of 1.5 points during April-September 2010. The index reflects the expectation of Indian industry about the performance of companies, sectors and the economy. The survey found inflationary conditions, slackening consumer demand, cost and availability of labour and high interest rates as the top concerns.

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 $23.51 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 335.79 crore on Monday, 18 October 2010, as per the provisional data from the stock exchanges. Domestic funds dumped shares worth a net Rs 1218.42 crore on that day.

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.

Volatility ruled the roost on Monday, 18 October 2010, as the market snapped a two-day steep slide on bargain hunting. The BSE 30-share Sensex was up 43.84 points or 0.22% to 20,168.89 and the S&P CNX Nifty was up 13.30 points or 0.22% to 6,075.95.

Weird quotes were seen during the 15-minute pre-open session that began on BSE and NSE on Monday, 18 October 2010, with a wide difference in the Sensex and Nifty values. 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