Market may extend recent losses

The market may extend three days losses as higher crude oil prices sparked inflation and interest rate concerns. Most Asian stocks were in the red. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 21 points at the opening bell.

High global commodity prices will add to pressure on profit margins of Indian firms caused by rising salaries and higher interest rates. Prices of aluminum and copper are seen rising further as Japan rebuilds after last month's massive quake and tsunami.



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 rate 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 down 8 cents a barrel at $112.71 a barrel.

On the macro front, 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.

Indian stocks had witnessed a strong rally recently on revival of inflow from foreign funds. As per provisional figures on NSE, foreign funds bought shares worth Rs 384.85 crore on Friday, 8 April 2011. The near term major trigger for the market is Q4 March 2011 results which will start trickling in starting this week. 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.

Volumes could be low in a truncated trading week. The market remains closed on Tuesday, 12 April 2011, on account of Ram Navmi and again on Thursday, 14 April 2011, on account of Dr. Ambedkar Jayanti.

The data of industrial output for the month of February 2011 and Wholesale Price Index for the month of March 2011 is due this week. A Capital Market poll of economists expects a median 4.8% growth in industrial production in February 2011, higher than January's 3.7% growth.

A Capital Market poll of economists pegs a median rate of rise in inflation at 8.4% in March 2011, higher than an annual rise of 8.3% in February 2011.

Most Asian stocks declined on Monday after US markets edged lower on Friday. The Key benchmark indices in Japan, South Korea, Singapore and Taiwan fell by between 0.03% to 0.47%. The key benchmark indices in China, Hong Kong and Indonesia rose by between 0.06% to 0.6%

U.S. stocks fell on Friday as a spike in oil prices revived worries that inflation would derail the recovery, jolting a market that had been treading water ahead of corporate earnings.

U.S. President Barack Obama and congressional leaders struck a last-minute budget deal on Friday to narrowly avert a government shutdown that would have hit the economy and idled hundreds of thousands of workers.

A slew of major US economic data due this week such as March 2011 retail sales and consumer price index may strengthen expectations that the US will end its $600 billion bond-purchase program in June 2011.