Market may open flat to slightly lower

The market may open flat to slightly lower if trading of S&P CNX Nifty futures on the Singapore stock exchange is any indication. Trading of Nifty futures on the Singapore stock exchange indicate a fall of 5 points at the opening bell. As per provisional figures on NSE, foreign funds sold shares worth Rs 1239.25 crore while domestic funds bought shares worth Rs 747.65 crore on Friday, 10 December 2010.

<1--more-->

Foreign funds pressed sales of shares worth a net Rs 4744.90 crore last week, as per the provisional data from the stock exchanges. The net outflow totaled Rs 3,263.43 crore so far this month, the stock exchanges data showed. Domestic funds bought shares worth a net Rs 128.95 crore so far this month, as per the data from the stock exchanges.

Asian stocks rose on Monday, 13 December 2010, as investors took in their stride China's latest attempt to cool inflation and fresh vows to tackle price pressure, while upbeat US economic data helped shore up the dollar. The key benchmark indices in Hong Kong, Japan, South Korea and Taiwan rose by between 0.13% to 1%. But, the key benchmark indices in Indonesia and South Korea fell by between 0.03% to 0.43%.

China's key stock index Shanghai Composite rose 1.35% on Monday after data showed Chinese inflation flew past forecasts to a 28-month high and the central bank raised lenders' requirements for the third time in a month.

In New York on Friday, 10 December 2010, an encouraging trade report and signs that a tax cut package would pass the Senate sent US stocks to their highest levels in two years. The market was also heartened by US data showing a rise in consumer sentiment to six-month high and a 3.2% rise in exports, figures that pointed to a firmer economic recovery.

Back home, 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.

The large capital flows into India are not a matter of concern, according to a mid-year review of the Indian economy tabled by Finance Minister Pranab Mukherjee in parliament last week. Even after this month's sell-off, the inflow of foreign funds in Indian stocks remains at record level this year.

According to mid-year review, the economy may grow by 9% during the year ending March 2011 (FY 2011). Average headline inflation is seen at 8.98% for the year, it said. The report indicated that the country's fiscal deficit will not be more than 5.5% of its gross domestic product in FY 2011.

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.

The recent macro economic data has been strong. Data announced on Friday, 10 December 2010, showed industrial output in October rose a faster-than-expected 10.8% from a year earlier, higher than the previous month's annual growth of 4.4%. Manufacturing output rose an annual 11.3% in October.

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 3 December 2010.

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 1 December 2010. The HSBC Manufacturing Purchasing Managers' Index rose to 58.4 in November from 57.2 in October, the survey said.

Exports rose an annual 26.8% to $18.9 billion in November 2010, while imports for the month grew 11.2% on the year to $27.8 billion, as the provisional data released by Trade Secretary Rahul Khullar showed on Wednesday.

But, high inflation remains the major cause of concern for the policymakers. The food price index rose 8.69%, while the fuel price index climbed 9.99% in the year to 27 November 2010, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 8.60% and 9.99% respectively. The primary articles price index was up 12.66% in the latest week compared with an annual rise of 12.72% a week earlier.

The government will announce inflation data for the month of November on Tuesday, 14 December 2010. The rate of inflation stood at 8.58% in October 2010, marginally lower than 8.62% in September 2010. The Reserve Bank of India (RBI) undertakes a mid-quarter policy review on Thursday, 16 December 2010. RBI governor D Subbarao recently expressed discomfort with the current levels of inflation. "Inflation is coming down but still above the Reserve Bank's tolerance level; growth on the other hand has been encouraging," Subbarao said.