Market may open higher on firm Asian stocks; HDFC Bank Q4 result eyed

The market may open in the green tracking firm Asian stocks which took in their stride China's hike in banks' required reserves on Sunday, 17 April 2011. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 13 points at the opening bell. India's second largest private sector bank by net profit HDFC Bank announces Q4 result today.

Foreign institutional investors (FIIs) sold shares worth Rs 253.43 crore and domestic institutional investors (DIIs) sold shares worth Rs 360.87 crore on Friday, 15 April 2011, provisional data released by the stock exchanges showed.



Most Asian stock markets edged higher on Monday on positive economic data in the US and despite China raised banks' required reserves on Sunday. The key benchmark indices in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan rose by between 0.04% to 0.4%. Japan's Nikkei Average fell 0.19%.

China raised banks' required reserves on Sunday for the fourth time this year, extending the fight against excessive liquidity and stubbornly high inflation in the world's second-largest economy. The 50-basis-point increase, effective from 21 April, lifted the required reserve ratio for the country's biggest banks to a record 20.5%. It will lock up about 350 billion yuan ($53.6 billion) of cash that banks would otherwise be able to lend.

Encouraging economic indicators sent US stocks higher on Friday, 15 April 2011, but the market's recent struggles are set to continue this week when more than one-fifth of S&P 500 companies report results. Consumer price inflation remained contained in March while industrial production increased. A separate survey showed improvement in consumer sentiment in April.

Back home, data showing acceleration in headline inflation in March 2011 and IT bellwether Infosys' disappointing earnings growth forecast for the year ending March 2012 (FY 2012) pulled the market lower on Friday, 15 April 2011. The BSE 30-share Sensex was down 310.04 points or 1.57% to 19,386.82. Earlier, Indian stocks had witnessed a solid surge on Wednesday, 13 April 2011, driven higher by gains in world stocks. The BSE Sensex had risen 2.25% on that day. The stock market was closed on Thursday, 14 April 2011, on account of Dr Babasaheb Ambedkar Jayanti.

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.

Macroeconomic concerns due to high inflation and surge in crude oil prices remain. 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%.

A surge in crude oil prices over the past few months has already 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.

India imports majority of its crude oil requirements and high oil prices have 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 70 cents or 0.64% at 108.96 a barrel.

South Asia is likely to receive normal monsoon rains in 2011, a global weather forum meeting said in a statement on Friday, 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 on 19 April 2011.