Market may extend last three days losses

The market may open slightly lower extending last three days losses if trading of S&P CNX Nifty futures on the Singapore stock exchange is of any indication. It indicate a fall of 5 points at the opening bell. The oil prices at 2-1/2-year highs sparked inflation and interest rates worries. Asian stocks were firm.

India imports majority of its crude oil requirements and a surge in crude oil prices over the past few months has sparked inflation and interest rates worries. The Reserve Bank of India (RBI) is seen raising key short term policy rates by 25 basis points at its annual 2011-2012 monetary policy review on 3 May 2011.



High oil prices have also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were up 58 cents or 0.53% to 110.88 a barrel.

The International Monetary Fund on Thursday warned that the global economy was entering a period of scarcer oil that could drive prices up rapidly. In new analysis by the Washington-based global financial institution, the IMF said market tensions were increasing between growing demand for oil from fast-growing emerging market economies, like China, and production constraints due to maturing oil fields.

The food price index rose 9.18% and the fuel price index climbed 13.13% in the year to March 26, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 9.50% and 13.13%. The primary articles price index was up 12.97% compared with an annual rise of 12.98% a week earlier.

Good monsoon this year could help ease food inflation and boost rural income. Recent reports indicate that India will receive good rains during the July-September monsoon season this year. The India Meteorological Department (IMD) is expected to come out with its long term forecast of the summer monsoon rainfall season by the end of this month.

A combination of inflationary pressures, slower external demand, and tighter fiscal and monetary policies is expected to curb India's growth this year, the Asian Development Bank said in a report. India's gross domestic product is now expected to expand by 8.2% in 2011, down from an estimated rate of 8.6% in 2010, ADB said. Agricultural output, strong private consumption and exports all supported growth in 2010, it said.

But inflationary pressures have led the Reserve Bank of India to hike interest rates eight times in about a year, while the government has adopted tighter fiscal targets. This year, these policies will "also remain less accommodating than in the past," while "high oil prices remain a threat," ADB said. However, it expects growth to bounce back to 8.8% in 2012 "as investment and overall economic activity pick up and as planned reforms move forward."

Indian stocks witnessed a sharp rally recently on the back of heavy inflow from foreign funds. As per provisional figures, foreign institutional investors (FIIs) bought shares worth a net Rs 220.59 crore on Thursday, 7 April 2011. FII inflow in April 2011 totaled Rs 6366.30 crore (till 6 April 2011). FIIs had bought equities worth Rs 6897.80 crore in March 2011. FII inflow in the calendar year 2011 totaled Rs 3865.40 crore (till 6 April 2011).

The near term major trigger for the market is Q4 March 2011 results which will start trickling in from about mid-April 2011. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materials prices and interest rates are pressurizing profit margins of India Inc.

On the political front, the first phase of assembly polls took place in Assam on Monday, 4 April 2011 in 62 of the 126 assembly constituencies. The second and concluding phase of elections will be held on 11 April 2011 in the remaining 64 constituencies. Assam elections will be followed by elections in Tamil Nadu, Puducherry, West Bengal and Kerala in two months between April and May. While Assam will have two-phased poll, Tamil Nadu, Kerala and Puducherry in one phase and West Bengal in six phases ending on 10 May 2011. The vote count is scheduled for 13 May 2011 for elections held in all the five states.

Asian shares inched up on Friday, shrugging off a strong aftershock in Japan's earthquake-ravaged northeast. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Tawian rose by between 0.04% to 0.91%.

US market slipped on Thursday after a major aftershock in Japan reignited fears about its nuclear power crisis, but greater faith in the U.S. economy's steady path held losses in check.

New U.S. claims for jobless benefits fell last week and retailers racked up much stronger-than-expected sales in March, signs that the US economy off its growth path.

Bank of England left interest rates on hold, as expected, and European Central Bank hiked key lending rate to 1.25% from 1% on Thursday.