Market seen advancing on positive Asian equities

The market is likely to see a firm start tracking positive Asian equities. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a rise of 22 points at the opening bell. The recent resumption of buying by foreign funds will also support gains.

Foreign institutional investors (FIIs) bought shares worth Rs 431.48 crore on Tuesday, 6 September 2011, as per provisional data from the stock exchanges. Domestic institutional investors (DIIs) sold shares worth Rs 415.17 crore on that day.



The key benchmark indices edged higher on Tuesday, 6 September 2011, staging an intraday reversal aided by firm European stocks. The BSE Sensex was up 149.48 points or 0.89% to 16,862.81 and the S&P CNX Nifty was up 47.10 points or 0.94% to 5,064.30.

The much awaited Land Acquisition Bill, which seeks to lay down norms for increased compensation to land owners, was approved by the Union Cabinet on Monday, 5 September 2011. It is to be introduced in the Parliament today, 7 September 2011. The bill integrates land acquisition and rehabilitation and resettlement, defines public purpose clearly, has clause for retrospective effect and draws timelines for compensation.

Moody's Investors Services affirmed its Baa3 rating for India's foreign currency government debt and its Ba1 rating for local currency debt in an annual credit analysis released on Monday, 5 September 2011. The ratings firm assigned a positive outlook to India's rupee-denominated bonds, saying it will consider a unified Baa3 rating for all bonds if India improves its fiscal position and its commitment to strengthening the domestic market. The outlook for foreign-currency debt is stable.

The report was upbeat about India's ability to weather a global economic downturn. "While it is not immune to an international growth slowdown, the strength of domestic demand and the diversity of the economy provides a buffer against a deceleration in globally exposed sectors," the report said. It noted that India's foreign currency reserves equal four times its foreign debt obligations.

A debt-to-GDP ratio of 71% is cause for concern, as interest on this debt eats up 25% of India's revenues annually. However, "Moody's expects that continued GDP growth and incremental fiscal consolidation efforts will continue to lower the government debt/GDP ratio," the report said.

India's services sector grew at its slowest pace in more than two years in August 2011, throttled by feeble expansion in new business as a faltering global economy and tight domestic monetary conditions weighed, a survey showed on Monday, 5 September 2011. The HSBC Markit Business Activity Index, based on a survey of around 400 companies, slumped to 53.8 in August from 58.2 in July, the index's biggest one-month decline since January 2009. It was also the weakest growth since June 2009, but the index has stayed above the 50 mark that separates growth from contraction for 28 consecutive months.

The new business sub-index fell to its lowest level in three months in August, at 54.9 from July's 59.3, as dampening global economic conditions knocked orders. Expectations for new business were also scaled back in August. The survey also showed a reduction in service sector employment levels for the second consecutive month as new business growth slowed while input costs and output prices continued to march ahead.

India's manufacturing activity in August 2011 slowed to a 29-month low as exports took a beating amid the lingering uncertainty in the global economic environment, a survey showed Friday, 2 September 2011. The seasonally adjusted HSBC Purchasing Managers' Index, prepared by Markit, fell to 52.6 in August from 53.6 in July. The pace of new order flows in August decelerated to the slowest in 29 months as export orders contracted at the sharpest rate since the series was started, HSBC said.

Production backlogs fell for the first time since March 2010 as pressure on operating capacity subsided. Also, inflationary pressures intensified as both input and output prices rose.

Food inflation firmed up to 10.05% in the week ended 20 August 2011, the highest in nearly six months and up from 9.8% rise in the previous week. The data highlights a prolonged battle against inflation that could prompt the Reserve Bank of India to raise its policy interest rate for the 12th time since March 2010 when it next meets to review monetary policy on 16 September 2011.

Exports surged 81.79% to $29.3 billion while imports jumped 51.5% to $40.4 billion in July 2011 over July 2010, leaving a trade deficit of $11 billion, data showed last week.

The European Central Bank (ECB) is expected to keep its key interest rate unchanged at 1.5% at its monthly policy meeting on interest rates on Thursday, 8 September 2011. On the same day, the Bank of England's (BOE) Monetary Policy Committee is also expected to maintain its key benchmark rate at 0.5%, the thirty-first consecutive month at such a rate.

Asian markets edged higher on Wednesday as the yen weakened and valuations fell to the cheapest level since 2008. The key benchmark indices in Taiwan, Japan, South Korea, China, Hong Kong, Singapore and Indonesia were up by between 0.43% to 2.34%.

US markets declined on Tuesday on fears Europe still has failed to tackle its debt crisis. The Dow Jones Industrial Average fell 100.96 points, or 0.90%, to 11,139.30. The S&P 500 slid 8.73 points, or 0.74%, to 1165.24. The Nasdaq fell 6.50 points, or 0.26%, to 2473.83.

US President Barack Obama is scheduled to give a speech on Thursday, 8 September 2011, to propose steps to stimulate hiring in the backdrop of US unemployment crisis.