Market to take cues from global equities

With Q1 June 2011 results over, Indian shares will take cues from global markets. A recent correction in commodity prices, including that of oil and metals augurs well for Indian manufacturing firms and also the government in reining in oil subsidy burden. Lower commodity prices may also help rein in high inflation.

Next week is a truncated trading week. The stock market remains closed on Monday, 15 August 2011, on account of Independence Day. Shares of State Bank of India, Aditya Birla Nuvo, Reliance Communications, Reliance Capital and Shipping Corporation of India will on Tuesday, 16 August 2011, react to their Q1 results which will be announced on Saturday, 13 August 2011.



Investors investing in India have been worried that higher interest rates will crimp corporate profit growth. The barometer index BSE Sensex settled at 14-month closing low on Friday, 12 August 2011. Two leading banks, State Bank of India (SBI) and ICICI Bank, on Thursday, 11 August 2011, raised lending rates. The Reserve Bank of India (RBI) late last month raised its key lending rate by a steeper-than-expected 50 basis points to rein in high inflation. The RBI has raised interest rates 11 times since March 2010 to control inflation, which still reigns close to double-digit levels because of high food prices and intensifying demand pressures in non-food commodities.

According to poll carried out by Capital Market, economists expect headline inflation at 9.2% for July 2011, much above the Reserve Bank of India's perceived comfort level of 5% to 6%. The data is due on Tuesday, 16 August 2011.

Higher interest rates may continue to weigh on realty and automobile stocks. Buying of automobiles, including that of cars, utility vehicles and commercial vehicles is substantially driven by financing. As far as the realty sector is concerned, buying of both residential and commercial property is largely driven by finance.

US and European stocks have been quite volatile off late. On Monday, 15 August 2011, global equity markets will react to data on US retail sales for July 2011 to be released on Friday, 12 August 2011. Also due on Friday, 12 August 2011, is data on June US business inventories.