Market may open higher on firm Asian stocks. RBI's monetary policy in focus

The market may open higher as most Asian stocks edged higher. The rate sensitive auto, realty and banking stocks will be in action as RBI is seen raising its key lending rate by 25 basis points at its first quarter review of the monetary policy 2011-12 today, 26 July 2011, to tame inflation, which remains much above the central bank's perceived comfort level of 5% to 6%.

FIIs bought shares worth a net Rs 315.72 crore on Monday, 25 July 2011, as per provisional data from the stock exchanges. Domestic institutional investors (DIIs) bought shares worth Rs 224.25 crore on that day. Indian stocks shrugged off weak global cues and gained for the second straight day on Monday, 25 July 2011 led by telecom stocks, which rose on hopes other carriers would follow Bharti Airtel by raising call rates. A reform initiative from the government to open up multi-brand retail boosted sentiment. The BSE Sensex rose 148.99 points or 0.80% to 18,871.29, its highest closing level since 7 July 2011.



Reliance Industries (RIL)'s net profit rose 16.69% to Rs 5661 crore on 39.1% increase in net sales to Rs 81018 crore in Q1 June 2011 over Q1 June 2010. The growth in both net profit and net sales topped market expectations. RIL was seen reporting 15.44% growth in net profit to Rs 5600.35 crore on 28.7% growth in net sales to Rs 74951.47 crore in Q1 June 2011 over Q1 June 2010, as per average estimate of 10 brokerages. The result hit the market after trading hours on Monday, 25 July 2011.

RIL chairman and managing director Mukesh Ambani said, "Reliance Industries continues to deliver strong financial and operating results. The growth in earnings was driven by strong refining margins and sustained performance in the petrochemicals business. Our cash flows give us the unparalleled opportunity to allocate capital to higher-margin resource plays in leading markets around the world. We remain committed towards investing in India and have commenced the investment programme in the petrochemicals business".

RIL's gross refining margin (GRM) surged to $10.3 a barrel from $7.3 a barrel in Q1 June 2010. Gas production from RIL's KG-D6 field off the east coast declined 18% to 156.2 BCF in Q1 June 2011 over Q1 June 2010. Production of gas condensate from the filed jumped 81.6% to 0.21 million barrels in Q1 June 2011 over Q1 June 2010. The company said gas sales have been prioritized as per government's directive with effect from 9 May 2011.

Sterlite Industries at the fag end of the trading session on Monday, 25 July 2011 that consolidated net profit rose 62.6% to Rs 1639.73 crore on 65.57% rise in total income to Rs 9860.70 crore in Q1 June 2011 over Q1 June 2010.

India's largest car maker by sales Maruti Suzuki India is seen reporting weak Q1 results today, 26 July 2011, on account of lower sales volumes due to a strike at Manesar, Gurgaon unit and due to annual maintenance shutdown at that unit, pressure on profit margins on account of un-favourable currency movement and higher advertising spend.

Among other prominent results, steel major JSW Steel, power equipment major Bhel, decorative paints major Asian Paints and Shriram Transport Finance Company are set to unveil Q1 results today, 26 July 2011.

The market remain volatile in the near term as traders roll over positions in the derivatives segment from the near-month July 2011 series to August 2011 series ahead of the expiry of July 2011 derivatives contracts on Thursday, 28 July 2011.

As the crucial corporate earnings season gathers steam, investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs. A hike in transportation costs will add to cost pressure of India Inc. As per reports, freight rates have gone up by 8% to 9% on all routes across India following the recent hike in diesel prices.

UltraTech Cement, HCL Technologies, GAIL (India), Bank of Baroda, Infrastructure Development Finance Company (IDFC), Oil India and Lupin unveil results on 27 July 2011.

State-run oil exploration giant ONGC, FMCG giant Hindustan Unilever, Cigarette major ITC, Sun Pharma, cement majors--ACC and Ambuja Cements, Jindal Steel & Power, state-run Punjab National Bank, and GSFC unveil results on 28 July 2011. ICICI Bank, Power Finance Corporation, Bhushan Steel, Idea Cellular and TVS Motor unveil Q1 results on 29 July 2011. Sun TV announces Q1 results on 1 August 2011. Power Grid Corporation unveils Q1 results on 2 August 2011.

Bharti Airtel unveils Q1 results on 3 August 2011. Adani Power, Mundra Port And Special Economic Zone and Indian Hotels announce Q1 results on 4 August 2011. IL&FS Transportation Networks announces Q1 results on 5 August 2011. M&M announces Q1 results on 8 August 2011. ABB and GMR Infrastructure announce quarterly results on 9 August 2011. Tata Power unveils Q1 results on 10 August 2011. Tata Motors unveils Q1 results on 11 August 2011. Hindalco and Coal India unveil Q1 results on 12 August 2011.

The Reserve Bank of India (RBI) on Monday, 25 July 2011, said taming inflation warrants continuation of the anti-inflationary monetary stance. In its report titled 'Macroeconomic and Monetary Developments First Quarter Review 2011-12', the central bank said that inflation risk stays, while growth showed signs of moderation in Q1 June 2011. On current reckoning, growth is likely to stay around trend growth of around 8%, RBI said. However, downside risks have increased. Overall, some moderation in growth is expected in 2011-12.

The RBI said near-term upside risks to inflation remain significant. Price pressures are expected to persist through Q2 September 2011 as well and then moderate towards the later part of 2011-12. Breaking inertial dynamics of wage and food price rise is important for arresting inflation. Risks to baseline growth and inflation projections may arise from a significant departure of monsoon from normal, a collapse or re-build of global commodity price bubble, and euro-zone debt crisis assuming full-blown proportions. Notwithstanding the slowdown in growth, high inflation requires continued anti-inflationary bias with a close watch and responsiveness to new information, the central bank said.

The RBI said global recovery appears to be stalling. Global inflation is rising rapidly prompting debate over how much longer advanced economies can defer an exit from an excessively accommodative monetary policy. Meanwhile, commodity prices exhibited some decline in Q1 June 2011 with global growth weakening, but it is unclear if this is transitory, RBI added.

RBI said there has been timely arrival and advancement of monsoon. However, after a good rainfall in June 2011, the monsoon appears to be weakening a bit. Sowing till 22 July 2011 has been marginally less than that in corresponding period last year. On balance, agricultural growth is expected to stay broadly on track, RBI said. The growth in industrial production, though having moderated, has turned more broad-based. Services sector has sustained its momentum. Going forward, there is a possibility of some softening in industrial growth as a result of implied input costs, RBI said.

The central bank said that inflation remained high in Q1 June 2011, in line with the projections made in the May 2011 policy statement. There has been generalisation of inflation since December 2010 with dominant contribution from non-food manufacturing products. Inflation is being driven by both cost-push and demand-side factors. RBI added that food inflation has declined. The RBI said near-normal monsoon may not ease pressure on food inflation further due to increases in wage costs and support prices. These trends necessitate structural reforms to enhance supply response, while the anti-inflationary bias of monetary policy anchors inflation expectations, the central bank added.

The pick up in the annual monsoon rains has improved crop prospects. Rainfall between July 14 and July 20 was 7% above the long-term average, according to the India Meteorological Department, following two successive weeks of below-average rains that raised concerns about crops. July is the crucial month for sowing rice, sugarcane, pulses and cotton. The seasonal rainfall deficit had widened to 3% below the long-term average last week, but now stands at 1% below normal. So far, 12% of the country has had below-average rainfall, while 88% had normal or excess showers. The June-September monsoon season brings about 70% of India's annual rainfall and is crucial for crops as about 60% of the country's farmland is rain-fed.

Gujarat, the country's largest producer of groundnut and cotton, had 80% below-average rains until the end of June, but now the gap has narrowed to 34%. However, poor rains in Andhra Pradesh are causing worries for rice plantings. As per reports, just about 9% of the state's rice area has been sown so far.

Meanwhile, former telecommunications minister Andimuthu Raja, who is facing trial in the country's biggest corruption scandal, deflected blame onto the prime minister in court on Monday, saying Manmohan Singh had knowledge of a key decision. Raja appeared in court denying wrongdoing in a case over the alleged manipulation of the sale of 2G telecoms spectrum licences in 2007-8 when he was telecommunications minister.Raja, a member of UPA coalition partner DMK, has been charged with flouting telecoms rules and accepting bribes to favour some firms when they sought lucrative mobile phone licences at rock bottom prices, possibly causing the state losses of $39 billion in revenue.

Asian markets edged higher on Tuesday. The key benchmark indices in Hong Kong, Japan, Indonesia, Singapore, South Korea and Taiwan rose by between 0.01% to 0.78%. China's Shanghai Composite fell 0.13%.

U.S. stocks dipped on Monday as lawmakers remained in a standoff over raising the debt ceiling to avoid default. A deal remained elusive in Washington as President Barack Obama's Democrats and their Republican rivals pushed for separate budget proposals in Congress, increasing the threat of a ratings downgrade