Fund-flow to dictate market trend; inflation data eyed

Activity of institutional investors, liquidity scenario and global and domestic economic data will dictate the market trend in the forthcoming week. The wholesale price index for the month of October to be announced on Monday, 15 November 2010 will be closely watched.



The key benchmark indices suffered close to 4% fall in the week ended Friday, 12 November 2010 on profit booking after the recent rally and deteriorating global economic health with investors fretting China will again attempt to slow the growth of the economy.

A section of the market is 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. After Power Grid Corporation of India, Steel Authority of India and Indian Oil Corporation among others are lined up to float their follow-on public offers. The Indian government's part stake divestment through an initial public offer in state run firms Manganese Ore India and Shipping Corporation of India is likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose recently said.

Also the Government is likely to soon take a decision on giving the go-ahead for State Bank of India's rights issue and on its size. Reportedly, the bank plans to mop around Rs 18,000-21,000 crore before this fiscal-end through the issue.

Foreign funds have been the key drivers of the recent market rally which bought the key benchmark indices to a striking distance of their record highs hit in January 2008. Foreign institutional investors' inflow in November 2010 totaled Rs 17,268.80 crore (till 11 November 2010). They pumped Rs 1,30,191.90 crore in the Indian equity market in the calendar year 2010. In dollar terms, the net equity inflows in 2010 now stands at a record $28.68 billion, above last year's $17.45 billion. On the other hand, domestic institutional investors sold shares worth Rs 1159.41 crore till date in November 2010.

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 2563 firms surged 35.20% to Rs 93632 crore on 19.50% growth in sales to Rs 752403 crore in Q2 September 2010 over Q2 September 2009.