Market likely to see small gains in opening trade

The market is likely to open slightly higher as bargain hunting may emerge after a recent sharp sell-off. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a gain of 5 points at the opening bell. Asian markets were trading mixed on Monday, 22 August 2011. The market may remain volatile this week as traders rollover positions in the derivatives segment from the near-month August 2011 series to September 2011 series. The August 2011 derivatives contracts expire on Thursday, 25 August 2011.



A fresh setback in world equities weighed on Indian shares on Friday, 19 August 2011, as the key benchmark indices reached 14-1/2-month closing lows. The BSE Sensex tumbled 328.12 points or 1.99% to settle at 16,141.67, its lowest closing level since 25 May 2010. The Sensex has plunged 2,729.62 points or 14.46% in 18 trading session from a recent high of 18,871.29 on 25 July 2011 as foreign funds pressed sales.

The market sentiment remains edgy due to sustained selling by foreign funds. Foreign institutional investors (FIIs) sold shares worth Rs 902.61 crore on Friday, 19 August 2011, as per provisional data from the stock exchanges. FIIs have sold shares worth Rs 8956.50 crore this month, till 19 August 2011, as per data from the stock exchanges. There was a massive outflow of Rs 5279.30 crore in just three trading sessions between 5 August 2011 and 9 August 2011.

FIIs have sold shares worth a net Rs 13995.73 in calendar year 2011 so far, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs 21032.02 this year so far.

Investors investing in India are worried that higher interest rates will restrict corporate profit growth. Commercial banks have raised lending rates over the past few days after the Reserve Bank of India (RBI) late last month raised its key lending rate by a steeper-than-expected 50 basis points at a policy review. Three top commercial banks, State Bank of India, ICICI Bank and HDFC Bank, raised lending rates by half a percentage point in mid-August 2011.

Indian firms relying on European and US markets are worried about a likely economic slowdown in the US and Europe. Bilateral trade between India and the US stood at $36.5 billion in 2010.

Commerce Minister Anand Sharma on Friday, 19 August 2011, said India's discussions with the European Union (EU) and Canada to form free-trade agreements are in advance stages. India aims to boost bilateral trade with Canada to C$15 billion (US$15.3 billion) a year by 2015 from about C$4.2 billion in 2010.

With the 27-member EU, India had initiated discussions on the free-trade pact in 2007. The two sides originally hoped to conclude a wide-ranging deal by 2010 to boost trade to $237 billion annually by 2015. Their bilateral trade is currently worth about $92 billion.

Prime Minister Manmohan Singh on Saturday, 20 August 2011, said the government is aiming for 9% annual growth over a five-year period beginning 1 April 2012. "It will be prudent to have a growth target, which would ensure achievement of the objective of sustained inclusive growth at a level which will also take into account the capabilities of the economy to achieve higher growth," Mr. Singh said, after a meeting of the planning commission to finalize details of the 12th five-year plan. If the global economic situation improves, India's growth "can be 9.2% during the period," he added.

India sets five-year macroeconomic targets, and the planning commission's view is a part of planning for the next five-year period. The commission is chaired by the prime minister.

Reserve Bank of India (RBI) deputy governor Subir Gokarn, last week, said that the primary objective of monetary policy must be to keep inflation low and stable. The RBI is scheduled to undertake a mid-quarter policy review on 16 September 2011.

Food Minister K.V. Thomas, last week, said that the government plans to introduce a food security bill, which promises to give cheap food grains to 70% of the country's population, in the winter session of parliament. Thomas told reporters that the bill won't be introduced in the ongoing session of parliament, as earlier planned, because the "consultation process with state governments and different ministries is still on. "A ministerial panel had cleared the draft law last month.

Indian Meteorological Department (IMD) said on Thursday, 18 August 2011, that monsoon rains were 26% above normal in week to 17 August 2011, strengthening from a 14% above normal reading in the previous week. The June to September Southwest monsoon rains are crucial to crop production in 60% of the country that does not have adequate irrigation.

Total rainfall since the beginning of the season was 1% below normal until 17 August 2011, down from a deficit of 4% until last week. Good rains will help India achieve its target of increasing its food grains output to a record 245 million metric tonnes this crop year that started 1 July 2011. Good rains could help boost rural income and may help bring down food inflation. The rainfall has been normal in 65% of the country, while it has exceeded the normal in 23% and deficient in 12% until 17 August 2011.

The rainfall was excess to normal in oilseeds-growing western region, in the rice-growing eastern region as well as parts of the grain-bowl northern region and the north-western Rajasthan state. Plantings of key summer crops have been on the rise until 5 August, aided by favourable weather, including the main summer-sown rice crop. Rice acreage rose to 26.03 million hectares as against 24.47 million hectares during the same period last year. A news agency quoted IMD spokesman B.P. Yadav as saying on Thursday, 18 August 2011, that there could probably be a weakening of the monsoon rains again next week, especially in the northern region but showers may increase in central India and southern peninsula.

Anti-corruption activist Anna Hazare's fast entered seventh day today, 22 August 2011, as he continues to build pressure on the Government, rejecting the request for four months to pass the Lok Pal Bill in Parliament, insisting that it be done by 30 August 2011. Hazare on Sunday, 21 August 2011, also called on his supporters to sit on dharna at the houses of UPA ministers from today, 22 August 2011.

Asian stock markets were trading mixed today, 22 August 2011. The key benchmark indices in China, Hong Kong Japan and Taiwan rose by between 0.19% to 0.56%. The key benchmark indices in Indonesia, South Korea and Singapore were down by between 0.06% to 1.07%.

US stocks closed lower on Friday, 19 August 2011 and notched their fourth straight losing week, as investors continued worrying about a potential global recession and the health of the European banking system. The Dow Jones Industrial Average lost 172.93 points, or 1.57%, to 10817.65. The Standard & Poor's 500-stock index dropped 17.12 points, or 1.5%, to 1123.53 and the Nasdaq Composite slid 38.59 points, or 1.62%, to 2341.84.