Market may open flat to slightly lower; food inflation data eyed

The key benchmark indices may open flat to slightly lower tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 2 points at the opening bell. On the macro front, the government will unveil data on some wholesale price indices for the year through 26 March 2011 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.



Most Asian stocks edged lower on Thursday after the recent strong gains. The key benchmark indices in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan fell by between 0.03% to 0.61%.

Japanese stocks rose 0.57%, bouncing off losses in the previous session, with the ever-weaker yen boosting exporters and with the Bank of Japan possibly to announce new measures to support the financial system later in the day.

US markets inched forward on relatively light volume on Wednesday, with investors adding selectively and avoiding large bets ahead of earnings.

Back home, foreign institutional investors (FIIs) extended recent strong buying turning net buyers of Indian stocks in 2011. As per provisional figures FIIs bought shares worth Rs 528.47 crore on Wednesday, 6 April 2011. FIIs bought shares worth a net Rs 1562.70 crore during two trading sessions on Monday, 4 April 2011 and Tuesday, 5 April 2011, the latest data from Securities & Exchange Board of India (Sebi) showed. FII inflow in April 2011 totaled Rs 5650 crore (till 5 April 2011). FIIs had bought equities worth Rs 6897.80 crore in March 2011. FII inflow in calendar year 2011 totaled Rs 3149.10 crore (till 5 April 2011).

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. 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 for May 2011 delivery were down 45 cents a barrel or 0.41% at $108.38 a barrel.

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

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.

Standard & Poor's Ratings Services said on Wednesday that it had affirmed the 'BBB-' long-term and 'A-3' short-term unsolicited sovereign credit ratings on India. The outlook on the long-term rating is stable, it said. The ratings on India reflect the country's good economic growth prospects and its fairly strong external position. Positive investment trends further underpin the ratings, with foreign direct investment and portfolio investments covering a large share of the current account deficit. Nevertheless, the country's weak fiscal profile and structural problems temper its strengths. Structural problems not only constrain efficiency but also preclude a large share of the population from benefiting from the country's rising prosperity, it added.

A survey showed on Tuesday that growth in India's service sector slowed in March from February's blistering seven-month high as new business growth moderated slightly, while price pressures, particularly wages, continued to rise. The seasonally adjusted HSBC Markit Business Activity index, based on a survey of over 450 companies, slipped to 58.8 in March 2011 from 60.2 in February 2011, but remained above the 50 mark that denotes expansion for the 23rd consecutive month.

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.

The European Central Bank is widely expected to raise its key refinancing rate by a quarter of a percentage point to 1.25% at a policy meeting today, 7 April 2011, in what would be the first rate increase since the middle of 2008.