Market may open flat to slightly higher; inflation data eyed

The key benchmark indices may open flat to slightly higher if trading of S&P CNX Nifty futures on the Singapore stock exchange is of any indication. It indicate that the Nifty could gain 7 points at the opening bell.



In macro news, the wholesale price index for the month of October will be announced by the government today, 15 November 2010.

Buoyed by robust performance of its European unit Corus, Tata Steel posted a net profit of Rs 1,968 crore in Q2 September 2010 against a net loss of Rs 2,719 crore in the same period last year. Net sales for the quarter were Rs 28,090 crore (Rs 25,276 crore), a growth of 11%.

Tata Power Company's net profit rose 37% to Rs 252 crore in Q2 September 2010 over Q2 September 2009.

Asian markets edged lower after a firm start on Monday, 15 November 2010. The key benchmark indices in China, Indonesia, South Korea, Taiwan and Singapore fell by between 0.01% to 1.1%. Hong Kong's Hang Seng rose 0.8%.

Japan's Nikkei Average rose 0.71%. Japan's economy was stronger than expected in the July-September 2010 period, as consumer spending offset weakening exports and a strong yen. Real gross domestic product expanded at an annualized rate of 3.9% over the three-month period, the Cabinet Office said Monday.

US markets fell on Friday, 12 November 2010, on worries that China might try to put the brakes on its surging economy. Any slowdown in the Chinese economy will likely reduce global demand for oil, metals and grains, which sent prices of those commodities lower.

Ireland said on Sunday that it neither needed nor was discussing EU financial aid and denied reports that the European Union was pressing it to accept emergency funding.

In the face of a currency war between US and China, global leaders including India's prime minister Manmohan Singh on Friday, 12 November 2010 agreed to refrain from "competitive devaluation" and bring in exchange rate flexibility to ensure that no country gets undue advantage.

Back home, industrial output in September 2010 rose at a much slower-than-expected 4.4% in September 2010 from 8.2% a year ago, government data released on Friday, 12 November 2010, showed. The September IIP data is the lowest in 15 months. Meanwhile, the index of industrial production for August was revised upwards from 5.6% to 6.9%.

Manufacturing growth, which constitutes 80% of the industrial output, slumped to 4.5% in September 2010 from 8.3% in September 2009. The mining sector grew at 5.2% against 7.4%, electricity rose at 1.7% against 7.5% while consumer durables increased 10.9% against 21.9%, in September 2010 over September 2009.

The food price index rose 12.30%, while the fuel price index climbed 10.67% in the year to 30 October 2010, government data on Thursday, 11 November 2010, showed. In the prior week, annual food and fuel inflation stood at 12.85% and 10.67%, respectively. The primary articles price index was up 14.87% in the latest week compared with an annual rise of 15.43% a week earlier.

The $1.7 billion follow-on public offer of state-run Power Grid Corporation received strong response. The issue was subscribed 14.88 times.

While global liquidity remains ample, 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. Steel Authority of India and Indian Oil Corp are some of the other state-run firms that are planning large share sales in coming months.

Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 2961 firms surged 45.2% to Rs 103795 crore on 19.9% growth in sales to Rs 904068 crore in Q2 September 2010 over Q2 September 2009

The Reserve Bank of India (RBI) at its second quarterly monetary policy review on 2 November 2010 hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said. The Reserve Bank of India (RBI) next reviews monetary policy on 16 December 2010.

Foreign funds have made heavy purchases of $28.5 billion till date of Indian stocks.