Market likely to see dull start in opening trade, food inflation data eyed

The market is likely to see a flat-to-negative start following mixed global cues. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a fall of 12 points at the opening bell. However some bargain hunting may emerge after the recent market slide to a 6-week closing lows on Wednesday. The government will today, 4 August 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 23 July 2011.

FIIs sold shares worth a net Rs 869.69 crore on Wednesday, 3 August 2011, as per provisional data from the stock exchanges. Domestic institutional investors (DIIs) bought shares worth Rs 422.48 crore on that day.



Investors' focus continues on Q1 corporate earnings. Investors are focusing on 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.

Indian Hotels is on expected to report strong Q1 results today, 4 August 2011. The owner of the Taj group of hotels, Tata group Indian Hotels, is seen reporting strong Q1 June 2011 results on the back of higher occupancy rates (OR) and higher average room rates (ARR). The re-opening of its Taj Heritage wing, Mumbai, will aid revenue growth. The bottom line will get a boost from lower interest costs post repayment of loans from warrants proceeds. Indian Hotels unveils Q1 results

Adani Power and Mundra Port And Special Economic Zone will announce their Q1 results today, 4 August 2011. Cipla and IL&FS Transportation Networks are set to announce Q1 results on Friday, 5 August 2011.

The National Stock Exchange of India notified that derivatives trading in Coal India, Delta Corp, Dhanlaxmi Bank and Gujarat Flurochemicals will be available with effect from 5 August 2011.

M&M announces Q1 results on 8 August 2011. ABB, Tata Communications, Mahindra Satyam, GMR Infrastructure and VIP Industries announce quarterly results on 9 August 2011. Tata Power and Rural Electrification Corporation unveil Q1 results on 10 August 2011. Tata Motors, Castrol India and Shipping Corporation of India unveil quarterly results on 11 August 2011. Tata Steel, Hindalco, Coal India, National Aluminium Company, Jaiprakash Associates and HPCL unveil Q1 results on 12 August 2011. Aditya Birla Nuvo and Shipping Corporation of India unveil Q1 results on 13 August 2011.

The Reserve Bank of India (RBI) on Tuesday, 2 August 2011, tightened its rules on sales of derivative products, in a move aimed at preventing the mis-selling of these complex products to local firms. RBI said in a notification that no bank can be a "market maker" in a product that it can't price independently, even if it covers the risk from the deal with another bank immediately. A market maker is a financial middle-man, typically a bank, that helps the price discovery process and adds liquidity to the market by quoting both bid and ask prices for financial products.

The new rules prevent foreign banks from being market makers in a product if they can't price it locally. Banks must also now make sure that officials to whom they sell derivative products are backed by the board to execute such transactions, the RBI said. RBI didn't specify what derivatives are covered by the new rules.

The services sector expanded at its fastest clip in three months in July 2011, driven by solid expansion of new business, but input prices also rose faster, a survey showed on Wednesday, 3 August 2011. The HSBC Markit Business Activity Index, based on a survey of around 400 companies, rose to 58.2 in July from 56.1 in June, staying above the 50 mark that separates growth from contraction for the 27th consecutive month. The new business sub-index recorded its strongest growth since February, rising to 59.3 from 57.1, as demand improved and firms found new customers.

The economy will grow at 8.2% in the year to March 2012, but it faces a challenge in achieving the fiscal targets set in the annual budget, a top economic advisory panel said in a report released early this week. Headline inflation would remain close to 9% till October, before beginning to ease, and would be at 6.5% in March, the prime minister's Economic Advisory Council said.

Exports grew by an impressive 46% to $29 billion in June 2011, despite uncertainty in the US and European markets, the latest data showed. Merchandise exports had aggregated to $20 billion in June 2010. During the April-June quarter, overseas shipments grew by 46% to $79 billion, according to Commerce Ministry data released on Monday, 1 August 2011. Though imports grew by 42% to $37 billion in June, the trade deficit of $7.6 billion was almost half the level of $15 billion seen in May, lessening concerns over the country's balance of payments situation.

Growth in manufacturing sector fell for the third month in a row in July as a long series of interest rate hikes and faltering global demand weighed on new orders and output growth, a survey showed on Monday, 1 August 2011. The HSBC Markit Business Activity Index, based on a survey of around 500 companies, fell to a 20-month low of 53.6 in July from 55.3 in June, though it remained above the 50 mark that separates growth from contraction for the 28th consecutive month.

The Reserve Bank of India (RBI) raised its key lending rates by 50 basis points at a policy review on 26 July 2011, to tame high inflation. The RBI has raised its end March 2012 inflation target to 7% as against the previous estimate of 6%, saying inflation has been higher than its expectations. It kept its economic growth forecast of 8% for this fiscal year. The RBI revised downwards non-food bank credit growth projection to 18% for the year ending March 2012 (FY 2012) from 19% earlier.

Although the impact of past monetary policy actions is still getting transmitted, considering the overall growth and inflation scenario, there is a need to persevere with the anti-inflationary stance, the RBI said. Going forward, the monetary policy stance will depend on the evolving inflation trajectory, which, in turn, will be determined by trends in domestic growth and global commodity prices, the RBI said. A change in stance will be motivated by signs of a sustainable downturn in inflation, it added.

The uncertain global macro-economic environment poses a challenge for the domestic economy from the perspective of financing the current account deficit, RBI said. In this context, the composition of capital flows remains a concern. In recent months, some shift in composition of capital flows towards foreign direct investment (FDI) has been observed. This trend needs to be reinforced through policy actions to improve the quality of financing of the current account deficit, RBI said.

Asian markets were trading mixed as concerns about the pace of the global economic growth kept investors guarded. The key benchmark indices in South Korea, Singapore, Hong Kong and Taiwan fell by between 0.12% to 0.52%. The key benchmark indices in China, Indonesia and Japan rose bye between 0.26% to 0.91%.

US stocks rose on Wednesday on speculations that the Federal Reserve might consider a new stimulus programme to boost the sagging economy. The Dow Jones Industrial Average gained 29.82 points or 0.25% at 11,896.44. The S&P 500 rose 6.29 points or 0.50% at 1,260.34 and the Nasdaq advanced 23.83 points or 0.89% at 2,693.07.