Market may start 2011 on positive note

The market may edge higher on the first trading session of 2011 on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a gain of 16.50 points at the opening bell. Auto shares will be in demand on strong sales in the month just gone by.



As per provisional figures, foreign funds bought shares worth Rs 531.33 crore and domestic funds sold shares worth Rs 121.77 crore on Friday, 31 December 2010.

Foreign funds sold shares worth a net Rs 641.55 crore in December 2010, as per data from the stock exchanges. Domestic funds sold shares worth a net Rs 481.90 crore in December 2010, as per the data from the stock exchanges.

Tata Motors' total sales in December 2010 were 67,441 vehicles, a growth of 31% over 51,627 vehicles sold in December 2009. The company's domestic sales for December 2010 were 61,632 units, 28% growth over 48,173 units sold in December 2009.

Mahindra & Mahindra's total vehicle sales rose 42% to 34,062 units in December 2010 over December 2009. Domestic sales rose 43% to 32,546 units while exports increased 22% to 1,516 units in the same period.

Hero Honda reported a 33% growth in sales at 5.01 lakh units for December 2010 over the same month in 2009. The company recorded a sales growth of 16.4% during the calendar year 2010 with cumulative sales of over 5 million units. During the October-December quarter of 2010, the company sold 14,28,030 units, registering a 29% growth over the same period in 2009.

Asian markets opened higher on the first trading day of the New Year amid signs China's efforts to cool its economy are working and ahead of a report this week that is expected to show the labor market improving in the world's biggest economy. The key benchmark indices in Hong Kong, Indonesia, Singapore, South Korea and Taiwan rose by between 0.38% to 1.11%. Mainland Chinese markets were closed for a holiday.

US stocks closed out a year of double-digit gains and the S&P's best December since 1991 with a quiet and little changed session on Friday, 31 December 2010, as investors found no reason to make big bets ahead of the new year.

Back home, the Reserve Bank of India on Thursday, 30 December 2010 warned that sudden reversal of overseas portfolio investments that have been flooding in this year could create problems for the economy. "A potentially worrying feature of capital flows to India has been the dominance of portfolio flows which are prone to sudden stops and reversals," the RBI said in a report on assessment of the health of financial sector.

The second financial stability report by the central bank also warned that "at present, stressed liquidity conditions warrant caution and a watchful management in the coming months". With both financial and real sectors still under stress in advanced economies, the report said, "India will have to guard against vulnerabilities arising from risks to global growth and financial stability."

The report said that the other soft spots in the financial sector include widening current account deficit, deteriorating external sector ratios and tight liquidity position, in addition to inflationary pressures. The report also said that recent concerns regarding microfinance institutions (MFIs) warrant closer examination.

Inflation in the food articles group climbed to 14.44% in the week ended 18 December 2010 from 12.13% in the previous week, the latest government data showed. This was the fourth instance of an increase in food inflation after easing for seven consecutive weeks. Inflation in the Primary Articles group jumped to 17.24% in the week under review from 15.35% in the week ended 11 December 2010, the latest data showed. Inflation in the Fuel & Power group inched higher to 11.63% in the week ended 18 December from 10.74% in the week ended 11 December.

Prime Minister Manmohan Singh on Friday said the government would try to effectively fight inflation and improve governance in the new year.

The output of six key infrastructure sectors grew 2.3% in November 2010 from a year ago, the slowest pace in the last 21 months, raising the prospects of a drop in industrial growth for the month. The six core industries -- crude oil, petroleum refining, coal, electricity, cement and finished steel, have a combined weight of 26.7% in the index of industrial production and are considered an advance indicator of industrial activity. These sectors had grown an upwardly revised 8.6% in October 2010.

The current account deficit in the September quarter widened to a record high of $15.8 billion as booming domestic consumer demand sucked in imports and service sector exports suffered from weak global demand.