Market may open on a positive note; food inflation data eyed

The market may snap last two days' losses on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a gain of 10.50 points at the opening bell. As per provisional data, foreign funds sold shares worth Rs 1484.90 crore and domestic funds bought shares worth Rs 409.05 crore on Wednesday, 8 December 2010. In macro news, the government will unveil data on some wholesale price indices for the year through 27 November 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.



Asian markets were mostly in positive territory on Thursday, 9 December 2010, after an agreement in the US to extend tax breaks sent US shares US moderately higher. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.12% to 0.75%. But, China's Shanghai Composite fell 0.14%.

The upswing came after modest gains in the US stocks on Wednesday, 8 December 2010, where stocks fluctuated before turning positive late in the session. A compromise in Washington to extend tax cuts boosted shares and sent bond prices sharply lower, as some investors expect it to lead to economic growth.

Back home, 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 on Tuesday.

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 Reserve Bank of India (RBI) will revisit its growth projection for the economy at its third-quarter policy review on 25 January 2011, RBI governor Duvvuri Subbarao said on Wednesday. The RBI currently projects the economy to grow at 8.5% in the fiscal year ending March 2011. The central bank chief 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," he said.

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 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.

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.