Market may open higher on firm Asian stocks; food inflation data eyed

The market may open higher on firm Asian stocks. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a gain of 52.50 points at the opening bell.

Intraday volatility may remain high as traders roll over positions in the derivatives segment from the near-month August 2011 series to September 2011 series. The August 2011 derivatives contracts expire today, 25 August 2011.



In macro news, the government will 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 13 August 2011 today, 25 August 2011.

Automobile, metal and banking shares led Indian shares lower on Wednesday, 24 August 2011 as the market snapped a rally in the preceding two trading sessions. The BSE Sensex fell 213.49 points or 1.29% to settle at 16,284.98, 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. FIIs sold shares worth a net Rs 883.48 crore on Wednesday, 24 August 2011, as per provisional data from the stock exchanges. FIIs have sold shares worth Rs 9843.16 crore this month, till 23 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 14882.39 crore in calendar year 2011 so far, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs 21478.25 crore this year so far.

Among corporate news, the shares in Hero MotoCorp turn ex-dividend today for the dividend of Rs 35 per share for the year ended March 2011.

The Reserve Bank of India (RBI) said at first quarter 2011-2012 policy review late last month that that the uncertain global macro-economic environment poses a challenge for the Indian economy from the perspective of financing the current account deficit. 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, RBI said. This trend needs to be reinforced through policy actions to improve the quality of financing of the current account deficit, RBI said.

Meanwhile, 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.

Indian Meteorological Department (IMD) said on 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.

Asian shares jumped on Thursday, 25 August 2011 tracking overnight gains in Wall Street. The key benchmark indices in Taiwan, Indonesia, Singapore, China, Japan, Hong Kong and South Korea were up by between 0.19% to 1.87%.

U.S. stocks rallied for a second day on Wednesday as investors bought beaten-down financial shares and unloaded gold. Investors are looking forward to Federal Reserve Chairman Ben Bernanke's speech at Jackson Hole on Friday, 26 August 2011, amid a debate and speculation over further monetary easing, and specifically, about any reference to the Fed's third round of quantitative easing, or QE3.

Investors will scrutinize weekly US jobless claims, which is due later in the global day today, 25 August 2011 for signs of stabilization in the nation's labor market.