Market may edge higher on firm Asian stocks

The market may extend last week's strong gains on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a gain of 15 points at the opening bell. The market will heave a sigh of relief after the transporters' union -- the All India Motor Transport Congress (AIMTC) called off the proposed strike after the government assured it of some level of reduction in toll charges for trucks with three axles, among other issues. AIMTC had threatened to go on strike from 5 December 2010 if the toll charges were not reduced.



Most Asian stocks gained on Monday, 6 December 2010, as US stocks on Friday, 3 December 2010, shrugged off weak non-farm payrolls data. The key benchmark indices in China, Hong Kong, Indonesia, Singapore and Taiwan were up by 0.48% to 1.01%. But, the key benchmark indices in Japan and South Korea fell by between 0.19% to 0.3%.

US stocks closed their best week in a month on Friday, 3 December 2010, shrugging off tepid jobs growth in a sign that the rally may have further to run. Employment barely grew in November 2010. Non-farm payrolls rose by only 39,000, much weaker than the 140,000 new jobs that economists forecast. The US unemployment rate unexpectedly jumped to a seven-month high of 9.8%, the Labor Department said.

Federal Reserve Chairman Ben Bernanke said US unemployment may take five years to fall to a normal level and that Fed purchases of Treasury securities beyond the $600 billion announced last month are possible.

Back home, recent macro economic data has been strong. Business activity in India's services sector surged to a four-month high in November 2010, driven by robust growth in new orders, a survey showed on Friday, 3 December 2010. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 60.1 in November from 56.2 in October. It was the best showing for the index since July, and the 19th straight month it has remained above the 50 mark that divides growth from contraction.

The manufacturing activity strengthened further in November 2010 and the strong growth momentum is showing up in rising inflation pressures, according to an HSBC survey released on Wednesday, 1 December 2010. The HSBC Manufacturing Purchasing Managers' Index rose to 58.4 in November from 57.2 in October, the survey said.

The Indian economy grew a robust 8.9% year-on-year in Q2 September 2010, maintaining the same pace of expansion as the previous quarter, boosted by farm output and manufacturing, government data released Tuesday, 30 November 2010 showed. The manufacturing sector grew an annual 9.8% and farm output grew an annual 4.4% in Q2 September 2010. The government revised upwards the Q1 June 2010 GDP growth to 8.9% from 8.8% earlier.

Finance Minister Pranab Mukherjee recently said GDP growth would be between 8.5% to 8.75% in the current fiscal that ends in March 2011 (FY 2011). Chairman of the Prime Minister's Economic Advisory Council C. Rangarajan said the economy is expected to grow 9% in the year to March 2012 (FY 2012). Rangarajan also said the government may reassess FY 2011 growth expectations and that it was "not impossible" to reach 9% growth in the financial year.

The output of key infrastructure industries surged by a robust 7% in October 2010, against a 3.9% growth recorded in the same month last year, helped by a strong showing by the electricity, crude oil and the finished steel sectors. The latest data for the six core sector showed a sharp rebound from the output in September 2010, when growth in these sectors had slipped to 2.7%.

The latest data showed a continuation of the recent trend of easing of food inflation. The food price index rose 8.60% while the fuel price index climbed 9.99% in the year to 20 November 2010, government data on Thursday, 2 December 2010 showed. In the prior week, annual food and fuel inflation stood at 10.15% and 10.57% respectively. The primary articles price index was up 12.72% in the latest week compared with an annual rise of 13.38% a week earlier.

The next major trigger for the equity market is the advance tax payment of corporates for the third installment, which falls due on 15 December 2010. The advance tax figures will provide a cue on Q3 December 2010 corporate earnings.

As per provisional data released by the stock exchanges, foreign funds bought shares worth Rs 603.47 crore while domestic funds sold shares worth Rs 689.66 crore on Friday, 3 December 2010. Foreign funds bought shares worth a net Rs 1481.47 crore during the first three days this month, as per the data from the stock exchanges. Domestic funds sold shares worth Rs 1114.55 crore during the first three trading sessions this month.