Market may open marginally lower

The key benchmark indices may edge lower as most Asian stocks were in the red after South Korea hiked interest rates. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could fall 3.50 points at the opening bell. The stock market remains closed on Wednesday, 17 November 2010, on account of Bakri-Id.



Asian stocks were mostly lower Tuesday as an interest rate hike in South Korea added to speculation China will also tighten monetary policy to cool inflation. Any slowdown in the Chinese economy, the world's second-largest and fastest growing, would likely reduce its demand for oil, metals, grains and other imports and be felt around the world. The key benchmark indices in China, Hong Kong and Japan fell by between 0.02% to 0.76%. But, the key benchmark indices in Singapore and Taiwan rose by between 0.01% to 0.36%.

South Korea's Kospi fell 0.91% after the Bank of Korea raised its key interest rate for the second time in four months to 2.5% from 2.25%.

Euro zone finance ministers will try to find a way to end Ireland's debt crisis on Tuesday, with Dublin resisting pressure to seek a state bailout by signalling that only its banks may need help.

New York stocks had a mixed finish Monday, 15 November 2010 as the dollar posted its second day of gains over concerns that Europe is on the edge of another bailout.

Sales at US retailers posted their strongest gain in seven months during October, adding to signs the economy was regaining strength after hitting a soft patch in the summer. The generally upbeat report was tempered somewhat by news that a manufacturing gauge in New York state fell this month to its lowest level since April 2009.

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 $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.

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.

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 3203 firms surged 45.5% to Rs 104494 crore on 19.8% growth in sales to Rs 929073 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.