Market may extend gains; food inflation data eyed

The key benchmark indices may gain for the fourth straight day this week tracking firm global stocks. The recent slew of strong domestic economic data may further aid investor sentiment. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could advance 46 points at the opening bell



In macro news, the government will unveil data on some wholesale price indices for the year through 20 November 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.

Asian stock markets rose sharply Thursday after improved economic indicators powered big gains on Wall Street and worries eased about Europe's debt problems. The key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 0.4% to 1.78%.

Signs that the U.S. job market thawed in November jump-started the advance in US markets on Wednesday, 1 December 2010. ADP Employer Services, a payroll company, said small businesses added the largest amount of workers in three years last month. Improved economic growth in the U.S., the world's No. 1 economy, would be a boon for export-reliant Asia. The Institute of Supply Management said its index of manufacturing activity rose in November for the 16th month. The Federal Reserve then said the U.S. economy improved in 10 of the Fed's 12 regions.

Investors were also eyeing an interest rate decision by the European Central Bank later today.

Back home, the initial public offer (IPO) of state-run MOIL, the largest manganese ore producer in India, was subscribed a massive 56.43 times.

India's merchandise exports rose 21.3% to $18 billion in October 2010 over October 2009, boosting hopes that the country may be able to reach the $200 billion target fixed for the current fiscal. Imports during the period grew by 6.8% to $ 27.68 billion, leaving a trade deficit of $9.72 billion, data released today, 1 December 2010 showed.

India's 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 data on Business Activity Index, indicating the performance of the services sector, is due for release in the coming days.

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 on Tuesday 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%.

A bribe-for-loan scandal spooked the banking sector and the stock market recently. Chiefs of some of the top rung public sector banks and financial institutions were arrested by the Central Bureau of Investigation (CBI) on 24 November 2010, for allegedly sanctioning loans in return for bribes. The Securities & Exchange Board of India (Sebi) is reportedly examining the possibility of insider trading in shares of at least nine companies. The Sebi has joined the CBI to probe the possibility of insider trading in shares of these companies, named by the investigator as involved in the loan scandal, recent reports suggest.

The CBI has reportedly sent notices to 21 medium-to-large sized Indian companies regarding the ongoing probe into a financial bribery scandal. The cases are limited to individuals and unlikely to create a large fallout, a news agency report said, late last week, citing an unnamed senior CBI official. The CBI is not currently considering widening its probe into bribery over loans to corporates, the report added.

Finance Minister Pranab Mukherjee, last week, asked all banks, financial institutions and insurance firms to look into their exposures to firms named by the Central Bureau of Investigation in a loans bribery scandal. A ministry statement quoted Pranab Mukherjee as calling on regulatory and other institutions to further improve safeguards.

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.

But, year-end profit taking may cap upside on the domestic bourses in the near term. Funds based in US and Europe follow calendar year as their accounting year.