Market seen opening flat to positive on mixed global cues

The market is likely to see a flat-to-positive start with global cues providing little direction. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a rise of 1.50 points at the opening bell. A US labor department report on employment in December 2010 in the world's largest economy, due to be released later today, is closely watched.



Most Asian stock markets were trading lower on Friday, 7 January 2011, on a decline in commodity prices. The key benchmark indices in China, South Korea and Hong Kong rose by between 0.03% to 0.09%. The key benchmark indices in Taiwan, Japan, Singapore and Indonesia fell by between 0.15% to 1.44%.

US stocks had a mixed session on Thursday, 6 January 2011, with the Dow Jones Industrial Average posting its first down session of the year as retail and telecommunications shares lagged and euro-zone debt worries resurfaced. The Dow closed down 25.58 points, or 0.22%, to 11697.31. The Nasdaq Composite edged up 7.69, or 0.28% to 2709.89 and the Standard & Poor's 500-stock index shed 2.71, or 0.21%, to 1273.85.

Back home, government data on Thursday showed the food inflation accelerated to the highest level in more than a year in late December 2010. The food price index rose 18.32% and the fuel price index climbed 11.63% in the year to 25 December 2010. Annual food and fuel inflation stood at 14.44% and 11.63% respectively in the prior week. The primary articles price index was up 20.20% in the latest week, compared with an annual rise of 17.24% a week earlier.

Finance Minister Pranab Mukherjee on Thursday asked the state governments to remove supply chain bottlenecks at the earliest in the food sector to bring prices down quickly, even as food inflation accelerated to a one year high. Mukherjee also said a large part of the price rise is due to the widening gap between wholesale and retail prices in fruits, vegetables, milk and meat.

Corporate earnings for Q3 December 2010, which will start trickling in from the second week of January 2011, will set the direction for the market in the near term. Analysts see corporate profit margins to be under pressure in the coming months due to higher commodity prices, rising cost of debt, surging wages and increased competitive intensity across sectors. IT bellwether Infosys kickstarts the earnings reporting season on 13 January 2011.

The government on Wednesday, 5 January 2011, reportedly deferred its decision to free the prices of urea for now and bringing it under the Nutrient Based Subsidy (NBS) policy regime even as a panel of secretaries has been asked to work out a viable model for decontrolling the prices.

Union petroleum and natural gas minister Murli Deora on Wednesday, 5 January 2011, reportedly said that his ministry was not in favour of raising diesel and cooking gas prices despite a spurt in global prices of crude oil.

Growth in India's service sector eased in December 2010 from a four-month high the previous month, reflecting a slightly slower expansion in new business, a recent survey showed. The HSBC Markit Business Activity Index, based on a survey of around 400 firms, fell to 57.7 in December 2010 from 60.1 in November 2010 -- its strongest reading since July 2010. Both input and output prices rose in December 2010, with the growth in input costs accelerating to its highest levels since July 2010.

Exports in November 2010 rose an annual 26.5% to $18.9 billion, while imports for the month grew 11.2% on the year to $27.8 billion, government data released on Monday showed. India's trade deficit in November narrowed to $8.9 billion compared with $9.7 billion in October.

India's manufacturing activity continued to expand in December 2010, although the momentum from the prior month eased because of capacity constraints and a slowdown in new orders, a survey by HSBC showed early this week. The monthly purchasing managers' index eased to 56.7 from November's reading of 58.4, though it stayed well ahead of the threshold of 50, which separates expansion from contraction. "The PMI numbers show that the economy remains in high gear, but that this is becoming increasingly difficult to reconcile with a comfortable level of inflation," HSBC economists wrote in a statement. India's central bank, they wrote, may raise interest rates sooner rather than later to curb price increases.

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.

Weakness persisted on the bourses for the third day in a row on Thursday, 6 January 2011, as data showing a surge in food inflation in late December 2010 rekindled fears of interest rate hike by the Reserve Bank of India (RBI).

The BSE 30-share Sensex was down 116.36 points or 0.57% to 20,184.74 and the S&P CNX Nifty was down 31.55 points or 0.52% at 6,048.25.

As per provisional closing, foreign institutional investors (FIIs) sold shares worth a net Rs 385.63 crore on Thursday, 6 January 2011, while domestic institutional investors sold shares worth Rs 338.05 crore.

FIIs had bought equities worth Rs 2049.60 crore in December 2010. FII inflow in the calendar year 2010 totaled Rs 133266 crore. In dollar terms the net equity inflow in 2010 totaled $29.36 billion, compared to an inflow of $17.45 billion in 2009. The annual inflow in 2010 was at record level.