Weak Asian stocks may drag market lower

The market may slide on weak Asian stocks after bearish comments from Federal Reserve Chairman Ben Bernanke. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 40 points at the opening bell. Foreign institutional investors (FIIs) bought shares worth Rs 112.70 crore and domestic funds bought shares worth Rs 31.29crore on Tuesday, 7 June 2011, as per provisional figures released by the stock exchanges.

The key benchmark indices extended gains for the second straight day on Tuesday, 7 June 2011 to attain their highest closing levels in nearly one week as index heavyweights Reliance Industries (RIL) and Infosys Technologies rose. Gains in European shares and US index futures underpinned sentiment on that day. The BSE Sensex was up 75.51 points or 0.41% to 18,495.62, its highest closing level since 1 June 2011 on Tuesday.



In macro news, the services sector expanded at its slowest pace in 20 months in May 2011 as soaring prices and interest rate hikes gnawed at new business growth and reduced the level of optimism, a survey showed last week. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of over 400 Indian firms, slipped to 55 in May 2011 from 59.2 in April 2011, marking its twenty-fifth successive month above the 50 level that divides growth from contraction.

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, data showed last week.

The World Bank on Tuesday revised up its growth forecast for the developing world and warned that higher food and fuel prices were causing inflationary pressures to build up. In its updated Global Economic Prospects report, the World Bank said the pace of growth in the world's developing countries should average 6.3% over the next three years through to 2013, which is down from 7.3% in 2010.

Asian stocks were lower on Wednesday after bearish comments from Federal Reserve Chairman Ben Bernanke, adding to fears about the strength of the world economy. The key benchmark indices in Japan, Singapore, Indonesia, Taiwan, China, Hong Kong and Seoul were down by between 0.28% to 1.39%.

U.S. stocks extended a losing streak for a fifth day on Tuesday on mounting concerns about the economy after bearish comments from Federal Reserve Chairman Ben Bernanke. Federal Reserve Chairman Ben Bernanke on Tuesday acknowledged the economy has slowed but offered no hint the U.S. central bank is considering any more stimulus to accelerate growth. He also warned members of Congress who might be planning aggressive budget cuts that they have the potential to derail the recovery if cuts in government spending take hold too soon.

The Federal Reserve's second round of quantitative easing or QE2, a temporary policy designed to increase the money supply, keep interest rates low and stimulate the economy, ends on 30 June 2011.