Market may extend losses as S&P lowers US credit outlook to negative

The market may extend last two days losses tracking weak Asian stocks triggered after rating agency Standard & Poor's lowered its U.S. credit outlook to negative. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 43 points at the opening bell.

Foreign institutional investors (FIIs) sold shares worth Rs 981.56 crore and domestic institutional investors (DIIs) bought shares worth Rs 661.47 crore on Monday, 18 April 2011, provisional data released by the stock exchanges showed.



India's second largest private sector bank by net profit HDFC Bank announced after market hours on Monday that net profit rose 33.23% to Rs 1114.71 crore on 34.38% rise in total income to Rs 6724.31 crore in Q4 March 2010 over Q4 March 2010. The bank's Q4 results were better than market expectations. The board of directors of the bank also approved a 5-for-1 stock-split while approving the results.

Reliance Infrastructure said after market hours on Monday that it bought 1-lakh shares on Monday under its buyback program. The company had recently announced buyback of shares for an aggregate amount of Rs 1000 crore.

Asian markets fell on Tuesday after rating agency Standard & Poor's lowered its U.S. credit outlook to negative, prompting a global flight to other assets. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.69% to 1.63%.

US markets fell more than 1% on Monday as sovereign debt fears on both sides of the Atlantic and China's monetary tightening hurt the outlook for global economic growth.

U.S. states' credit ratings are not expected to change as a result of the negative outlook on the United States, Standard & Poor's said on Monday. The credit rating company on Monday for the first time downgraded its outlook on U.S. debt to negative, citing the large budget deficit and a lack of clarity in the government's ability to improve its fiscal situation.

Fresh fears that Greece will have to restructure its mountain of debt, possibly as early as this summer, sent the euro and some euro zone bond prices tumbling on Monday as the bloc's debt crisis escalated.

Back home, the near term major trigger for the market is Q4 March 2011 results of India Inc. 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. High global commodity prices will add to pressure on profit margins of Indian firms.

South Asia is likely to receive normal monsoon rains in 2011, a global weather forum meeting said in a statement on Friday, 15 April 2011, a data that should cheer countries such as India whose massive demand for farm goods impact international markets. The South Asia Climate Outlook Forum, which met in Pune, said La Nina weather phenomenon, which aids monsoon in the region, would continue until June.

For India, good monsoon this year could help ease food inflation and boost rural income. The India Meteorological Department (IMD) will give its first official forecast for the June to September monsoon today, 19 April 2011.

The wholesale price index (WPI) rose 8.98% in March 2011, higher than 8.31% rise in February 2011 and also ahead of market expectations, the latest data showed. The WPI inflation for January 2011 was revised upwards to 9.35% from 8.23%. 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 amid high global crude oil prices.

India imports majority of its crude oil requirements and high oil prices have also raised concerns about widening current account deficit. 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 down 17 cents or 0.16% at 106.95 a barrel.

Sovereign wealth funds (SWFs), one of the largest investor groups in the world, may soon be able to acquire up to 20% stake in listed Indian companies without worrying about making an open offer. At present, SWFs are not allowed to hold more than 10% in any listed entity in India through the portfolio investment route. The Securities and Exchange Board of India (Sebi) is looking at amending the norms for SWFs. However, this will be subject to a condition that the stake increase does not lead to a change in control. At present, an entity which buys over 15% in a listed company has to make an open offer for another 20%. Sebi plans to amend the takeover and foreign institutional investor (FII) regulations so that India's Comprehensive Economic Cooperation Agreements (CECAs) with other governments can be implemented. The new rules would apply to SWFs from countries with whom India had signed CECAs, Sebi said in the agenda note for its board meeting next Monday. Sebi will consider the exemption on a case-by-case basis.

The key benchmark indices dropped to their lowest level in three-weeks on Monday 18 April 2011 on weak global stocks and as high inflation and persistently high crude oil prices rekindled macroeconomic worries.The BSE 30-share Sensex was down 295.65 points or 1.53% to 19,091.17 on Monday, its lowest closing level since 28 March 2011.