Market may extend recent losses on weak Asian stocks; inflation data eyed

The key benchmark indices may extend recent losses tracking weak Asian markets. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a fall of 6.50 points at the opening bell. Housing Development Finance Corporation (HDFC) announces Q3 result today, 14 January 2011.



The government will announce inflation data for the month of December 2010 today, 14 January 2011. A Capital Market poll of economists expects inflation based on wholesale prices to rise to 8.42% in December 2010 from 12-month low of 7.48% in November 2010. High food prices have reinforced expectations for interest rate hike by the central bank at a policy review on 25 January 2011. As per a poll by Capital Market, economists widely expect 25 basis points increase each in repo rate and reverse repo rate at January policy review.

The embattled Congress-led coalition government failed to announce major policy decisions on Thursday to tackle soaring food prices after days of wrangling, taking only minor measures seen as unlikely to make a major impact. After deliberating for three days, the Prime Minister's Office (PMO) on Thursday announced series of measures including complete ban on exports of edible oil, pulses and non-basmati rice besides asking for long-term investment in supply chains, including provisions for cold storages to be "dovetailed with organised retail chains for quicker and more efficient distribution of farm products, minimising wastage". The statement says it will "recommend action on fiscal, monetary, production, marketing, distribution and infrastructure fronts to prevent price spikes, and suggest measures to strengthen collection and analysis of data and forecasting". Among the immediate measures the centre has asked state governments to act against hoarders and black marketers of essential commodities.

The PMO statement said 'government will review import and export of all essential commodities on a regular basis and impose controls on exports and ease restrictions on imports, including tariff reduction where necessary, to improve domestic supplies'. The details of the plan was finalised by Pranab Mukherjee, Sharad Pawar, Planning Commission deputy chairman Montek Singh Ahluwalia, Cabinet secretary KM Chandrasekhar and Forward Markets Commission chairman BC Khatua on Wednesday. The PMO also said state owned enterprise would intensify purchases of essential commodities, particularly edible oils and pulses, for distribution through their retail network and also through the Public Distribution System operated by the state governments. "The existing schemes for subsidised distribution of edible oils and pulses will be continued," the statement noted.

Asian shares declined on Friday, with weakness on Wall Street dampening sentiment across the region. Investors were taking profits after the Nikkei closed at an eight-month high on Thursday, and the dollar's fall under the 83-yen line hurt exporters.The key benchmark indices in China, Indonesia, Japan, South Korea, Singapore and Taiwan fell by between 0.06% to 1.24%. Hong Kong's Hang Seng rose 0.06%.

US stocks retreated on Thursday, 13 January 2011 after a report found that more people applied for unemployment benefits last week. The U.S. Labor Department said first-time applications for unemployment benefits rose 35,000 from the week before to 445,000. It was the highest level since October and above what economists had predicted.

Back home, the food price index rose 16.91% and the fuel price index climbed 11.53% in the year to 1 January 2011, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 18.32% and 11.63%, respectively. The primary articles price index was up 17.58% in the latest week, compared with an annual rise of 20.20% a week earlier.

The government data released on Wednesday, 12 January 2011, showed industrial output rose at 2.7% in November 2010 as against a revised 11.30% growth in October 2010, as growth in the manufacturing output slowed sharply.

The trade deficit in December 2010 narrowed to $2.6 billion from $8.9 billion in November 2010, the lowest in the last three years, trade secretary Rahul Khullar said on Saturday, 8 January 2011.

As per provisional data on NSE, foreign funds sold shares worth Rs 249.77 crore and domestic funds bought shares worth Rs 242.42 crore on Thursday.