Market may open flat to slightly lower

The market may open flat to slightly lower tracking mostly down Asian stocks ahead of a speech by Federal Reserve Chairman Ben Bernanke later in the global day. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a fall of 6 points at the opening bell.

Key benchmark indices extended losses for the second straight day on Thursday, 25 August 2011 as data showing a rise in food inflation in mid-August 2011, data showing sustained selling by foreign funds this month, standoff between the government and anti-corruption activist Anna Hazare over the Lokpal Bill and reports that China has deployed more advanced nuclear missiles at Sino-Indian border as a 'deterrent posture' weighed on investor sentiment. The BSE Sensex was down 138.65 points or 0.85% to 16,146.33, its lowest closing level since 19 August 2011.



Foreign institutional investors (FIIs) have pressed heavy sales this month amid the ongoing credit crisis in the euro zone. The sustained selling by foreign funds is a cause for concern for India Inc. Foreign portfolio inflow acts as a catalyst to private corporate capital expenditure in India. Foreign institutional investors (FIIs) sold shares worth net Rs 1440.55 crore on Thursday, 25 August 2011. FII outflow in August 2011 totaled Rs 12,167.19 crore (till 25 August 2011).

FIIs have sold shares worth a net Rs 17,206.42 crore in calendar year 2011 so far, till 25 August 2011, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs 22424.36 crore this year so far.

The Reserve Bank of India (RBI) on Thursday, 25 August 2011, said that there is a need to rebalance demand from consumption to investment by stepping up savings in the economy. In order to achieve a 9% growth in Twelfth Five Year Plan (2012-17), the investment rate of 40.5% would be required if incremental capital output ratio (ICOR) remains unchanged from 4.5% during the Eleventh Plan. This requires augmenting saving as well as bringing about technological and institutional improvements to lower ICOR. ICOR is measure used predominantly in determining a country's level of production efficiency.

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, last week, 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.

The food price index rose 9.8% and the fuel price index climbed 13.13% in the year to 13 August 2011, government data on Thursday, 25 August 2011, showed. In the previous week, annual food and fuel inflation stood at 9.03% and 13.13% respectively. The primary articles index was up 12.4%, compared with an annual rise of 11.64% a week earlier.

Prime Minister Manmohan Singh, last week, 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.

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.

Prospects for agricultural production remain positive. The rainfall deficit in the country had widened to 5% of the long-term average in July 2011, but a pickup in August helped narrow the deficit to 1% by 24 August 2011. Good rains could help boost rural income and may help bring down food inflation.

Asian shares edged lower on Friday as investors waited for a speech by Federal Reserve Chairman Ben Bernanke later in the day. The key benchmark indices in Singapore, Hong Kong, Indonesia, China, Japan, Hong Kong and Taiwan were down by between 0.01% to 0.59%. South Korea's Kospi rose 0.31%.

U.S. stocks fell on Thursday as investors raised cash ahead of a critical speech from Fed Chairman Ben Bernanke, hoping he will give them a clearer picture of the Fed's plans for the struggling economy. The report showing continued U.S. job market weakness helped fuel the selling.

Investors are looking ahead to Federal Reserve Chairman Ben Bernanke's scheduled speech later in the global day today, 26 August 2011, in Jackson Hole, Wyo., and whether he will announce another round of quantitative easing or QE3 to prop up the US economy. The Fed chairman used the same forum in 2010 to hint at the launch of a QE2, which sparked a rush into risky assets and away from dollar.