Market may open flat to slightly higher; Axis Bank eyed

The key benchmark indices may open flat to marginally higher as most Asians stocks rebounded from the recent sharp losses. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could see a flat opening.

In macro news, the government will unveil data on some wholesale price indices for the year through 6 November 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.



Market had remained closed on Wednesday, 17 November 2010 on account of Bakri-Id.

Enam Securities, one of the top three investment bankers on Dalal Street, has come under the fold of Axis Bank. The board of directors of Axis Bank and privately-held Enam Securities — promoted by Vallabh Bhansali and others — have agreed to combine their investment banking and equities business in a share swap deal worth Rs 2,067 crore. As part of the deal, Enam Securities, which was set up in 1984 as a financial services provider, will demerge its investment banking, institutional equities, retail equities and related businesses such as distribution of financial products, NBFC to a wholly-owned subsidiary of Axis Bank pursuant to a scheme of arrangement. Axis Bank will also demerge its investment banking business into the wholly-owned subsidiary.

Asian shares were mostly higher on Thursday, with markets recovering from recent falls as European Union officials seek a way to fix the region's debt crisis. The key benchmark indices in China, Hong Kong, Japan and South Korea rose by between 0.01% to 0.7%.But, the key benchmark indices in Singapore, Taiwan and Indonesia fell by between 0.11% to 0.49%.

In New York Wednesday, stocks ended mixed as concerns that Ireland will need outside help to repay its debts were coupled with a steep drop in housing construction in the U.S. In the U.S., construction of new homes fell 11.7% in October, the Commerce Department reported.

Britain, which is not part of the 16-nation bloc that uses the euro, offered Wednesday to provide additional support to Ireland beyond what it gets from the European Union or the International Monetary Fund.

Back home, India's exports in October 2010 rose an annual 21.3% to $18 billion, while imports for the month grew 6.8% on the year to $27.7 billion, Trade Secretary Rahul Khullar said on Monday, 15 November 2010. Khullar said exports could touch $200 billion in the fiscal year that ends in March 2011 (FY 2011). He also said that the trade deficit will not top $135 billion. The trade deficit had widened to a 23-month high of $13.06 billion in August 2010 and Khullar had said the deficit could touch $135 billion for FY 2011, higher than his earlier forecast of $120 billion. The government is targeting close to 15% export growth in the current fiscal.

The wholesale price index rose 8.58% in October 2010, a touch slower than 8.62% increase in September 2010, data released by the government Monday, 15 November 2010, showed. The annual reading for August 2010 was upwardly revised to 8.82% from 8.5%.

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%.

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 Indian stocks this year. Net equity inflow in 2010 stands at $28.53 billion, above last year's $17.45 billion. The annual inflows are at record levels this year.

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

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.

Chairman of the prime minister's Economic Advisory Council C. Rangarajan, last week, said that the Indian economy has the capacity to absorb capital inflows of up to $70 billion annually without government intervention. "The quantitative easing by the US Federal Reserve may have implications in terms of capital inflows, but as I had indicated earlier, India's current-account deficit will be around 3% of gross domestic product" this fiscal year, C. Rangarajan said.

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 3330 firms surged 45.3% to Rs 104426 crore on 19.8% growth in sales to Rs 933659 crore in Q2 September 2010 over Q2 September 2009.