Market may fall on weak Asian stocks; food inflation data eyed

The market may fall, snapping two days gains on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a slide of 59.50 points at the opening bell. Foreign institutional investors (FIIs) bought shares worth Rs 445.22 crore and domestic funds sold shares worth Rs 141.96 crore on Wednesday, 1 June 2011, as per provisional figures released by the stock exchanges. The BSE Sensex was up 105.53 points or 0.57% to 18,608.81 on Wednesday, its highest closing level since 2 May 2011.

On the macro front, the government will today, 2 June 2011 unveil data on some wholesale price indices viz. the food price index, the primary articles index and the fuel price index for the year through 21 May 2011.

India's third largest software exporter Wipro announced after market hours on Wednesday that the Jammu and Kashmir state government has selected the company for automating its state power distribution department.

India's largest motorcycle maker by sales Hero Honda Motors reported 14.7% increase in sales to 5,00,234 units in May 2011 over May 2010.

In macro news, India's infrastructure sector output grew 5.2% in April from a year earlier, slower than an annual growth of 7.4% in March, government data showed on Wednesday. The infrastructure sector accounts for 26.7% of India's industrial output.

Growth in India's manufacturing sector eased slightly in May as the pace of new orders slowed, but factories' input and output prices continued to rise sharply. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 companies, edged down to 57.5 in May from 58.0 in April, weighed down by a slower expansion rate for new orders and a labour shortage.

The Indian economy grew by a slower-than-expected 7.8% in Q4 March 2011 and also slower than a revised 8.3% growth in Q3 December 2010, data showed on Tuesday. The manufacturing sector output rose 5.5% and farm output rose 7.5% in Q4 March 2011. The GDP grew 8.5% in the fiscal year ended March 2011, higher than 8% growth in the previous fiscal year.

The annual monsoon rains have hit Kerala two days earlier than expected this year, boosting prospects for a harvest that could spur Asia's third-largest economy. The India Meteorological Department (IMD) has predicted the southwest monsoon 2011 to be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. IMD has indicated that there is very low probability for the season rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA).

Good rains would help ease food inflation and boost rural income. Rainfall that comes within 96% to 104% of the long-term average is considered a normal monsoon season, but this alone doesn't guarantee a good crop. The timing and spread of the rains are equally important. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector, which lacks irrigation facilities on more than half its farm land. Monsoon rains usually enter India's mainland through the southern state of Kerala in the first week of June, gradually progressing to cover most of central and northern India by July, before retreating in September.

Asian stocks skidded on Thursday tracking overnight losses in US stocks. The key benchmark indices in China, Hong Kong, Japan, Singapore, South Korea and Taiwan fell by between 0.58% to 1.55%.

US stocks ended a four-day rally with its worst session since August on Wednesday as investors faced more signs the economic recovery is fading. According to ADP, U.S. private employers added a scant 38,000 jobs in May, the lowest since September 2010 and far below what had been expected.