Market poised for firm start on buoyant global cues

The market is likely to edge higher tracking positive global cues. Asian stocks advanced on Monday while US markets settled higher on Friday after euro zone leaders made some progress towards a strategy to tackle the region's debt crisis. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 56.50 points at the opening bell. Cigarette major ITC, Sterlite Industries and Titan Industries will unveil their Q2 results today, 24 October 2011.

Stocks may remain volatile in the immediate future as traders roll over positions in the futures & options (F&O) segment from the near-month October 2011 series to November 2011 series. The near-month October 2011 derivatives contracts expire on Tuesday, 25 October 2011.



Key benchmark indices edged lower for the second day in a row on Friday amid concerns that the Reserve Bank of India may further hike its lending rates to tame stubbornly high inflation and lingering doubts over a resolution to euro-zone debt crisis. The BSE Sensex lost 151.25 points or 0.89% to settle at 16,785.64. The Sensex has risen 331.88 points or 2.01% in this month so far. The index has slumped 3,723.45 points or 18.15% in calendar 2011. From a 52-week high of 21,108.64 on 5 November 2010, the Sensex has lost 4,323 points or 20.47%. From a 52-week low of 15,745.43 on 4 October 2011, the Sensex has risen 1,040.21 points or 6.6%.

A special Muhurat trading session is being held from 16:45 IST to 18:00 IST on Wednesday, 26 October 2011 on account of Diwali. There is no regular trading session on that day. The market also remains closed on Thursday, 27 October 2011 on account of Diwali, the festival of lights.

Foreign institutional investors (FIIs) pressed sales in equities for the fourth day in a row with a net outflow of Rs 234.01 crore on Friday, 21 October 2011, as per provisional figures on stock exchanges. FII outflow totaled Rs 1005.65 crore in four trading sessions from 18 October to 21 October 2011. FIIs have sold shares worth a net Rs 1,444.69 crore so far this month and Rs 20,979.15 crore so far this calendar year 2011, as per data from the stock exchanges.

Finance Minister Pranab Mukherjee on 19 October 2011 said that the government is concerned about the volatility of FII flows. Mukherjee said loose monetary policies adopted by central banks in advanced economies have added to global liquidity, driving investments into better off emerging economies and fueling inflation in these countries.

India's economy will grow at a rate less than the earlier government projection in 2011/12, Mukherjee said. "With the crude prices remaining where they are it will be a great challenge to maintain the fiscal deficit numbers to 4.6% this year," Mukherjee said.

Stock-specific activity may dominate trade in the near-term as earnings flow in. Investors will closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.

Axis Bank reported 25.2% rise in net profit to Rs 920.32 crore on 39.8% rise in total income to Rs 6510.89 crore in Q2 September 2011 over Q2 September 2010.

Power Grid Corporation of India reported 8.8% rise in net profit to Rs 708.74 crore on 10.7% rise in total income to Rs 2460.66 crore in Q2 September 2011 over Q2 September 2010.

Grasim Industries reported 29.2% rise in consolidated net profit to Rs 417.94 crore on 27.8% rise in total income to Rs 5880.94 crore in Q2 September 2011 over Q2 September 2010.

NTPC, Kotak Mahindra Bank and Dr. Reddy's Lab unveil Q2 results on 25 October 2011. Indian Hotels unveils Q2 results on 28 October 2011. Maruti Suzuki and LIC Housing Finance report Q2 results on 29 October 2011. ICICI Bank, Wipro, Hindustan Unilever, Dabur India, Colgate Palmolive (India), Bank of Baroda, NMDC and BPCL unveil Q2 results on 31 October 2011

Cement majors ACC and Ambuja Cements, Punjab National Bank and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. Sun TV Network, Ashok Leyland and TVS Motor report Q2 results on 3 November 2011. ONGC, Bharti Airtel and GlaxoSmithKline Pharmaceuticals unveil quarterly results on 4 November 2011.

Infrastructure Development Finance Company and ABB unveil results on 8 November 2011. Ranbaxy Laboratories and Power Finance Corporation unveil quarterly results on 9 November 2011. Hindalco unveils Q2 results on 10 November 2011. Jet Airways (India) and Tata Chemicals unveil Q2 results on 11 November 2011. Shipping Corporation of India reports Q2 results on 12 November 2011. Tata Motors, Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011. Tata Power unveils Q2 results on 15 November 2011.

The falling rupee could bloat India's already mammoth import bill and further strain government finances as the fuel subsidy burden swells, Finance Secretary R.S. Gujral said Friday, 21 October 2011. The rupee hit a near 30-month low below 50 against the dollar on Friday, 21 October 2011. Elevated crude oil prices are likely to push the government to spend an additional Rs 40000 crore on fuel subsidies in the current year.

The market regulator Securities and Exchange Board of India recently set a minimum net worth of Rs 100 crore for companies that wish to issue structured products or market-linked debentures to raise funds. Sebi also set the minimum size for such issues at Rs 10 lakh. Market-linked debentures are hybrid products which have the features of usual debt securities, but offer market-linked returns like an exchange-traded derivative. The issuer company will have to appoint a third party, a credit-rating company registered with the regulator, which will provide the value of the security at least once a week, Sebi said in a circular.

The government last month raised the limit of overseas borrowing for companies to $750 million from $500 million. Indian companies can also now raise loans up to $1 billion in Chinese yuan.

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on 12 September 2011, further relaxed the norms on FII investment in such bonds. Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

The government recently raised its borrowing target for the current fiscal year by Rs 52800 crore, surprising the market and fueling worries that it may even overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. The government will borrow Rs 2.2 lakh crore during October 2011-March 2012 period, or the second half of the fiscal year, compared with the target of Rs 1.67 lakh crore announced in budget in February 2011. C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council on 29 September 2011 said it is going to be difficult to achieve fiscal deficit target of 4.6% of GDP for the year ending March 2012.

The government's new borrowing programme may crowd out private borrowers who come into the market in the second half of the year. Credit growth normally picks up after October every year when the busy season starts.

With inflation remaining at uncomfortably high level, the Reserve Bank of India (RBI) is seen delivering another rate hike at its half-yearly review of the monetary policy on Tuesday, 25 October 2011. A 25 basis points hike in repo rate is expected from the central bank on 25 October 2011. The annual rate of inflation in the food space increased in early October while inflation in the fuel group also edged up, data released by the government showed recently.

Boosting farm output on a sustainable basis is the only long-term solution to address supply constraints and cool high commodity prices that have often hurt economic growth, Mukherjee said on 17 October 2011.

While its tolerance of inflation has gone up with rising income levels, the Reserve Bank of India (RBI) will raise rates further if high inflation persists, central bank deputy governor Subir Gokarn said on 12 October 2011. On the same day, RBI governor D Subbarao reiterated that controlling inflation is the main focus of monetary policy.

RBI said at a monetary policy review on 16 September 2011 that it is imperative to persist with the current anti-inflationary stance because a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. The RBI raised repo rate by 25 basis points on 16 September 2011.

Going forward, the stance of the monetary will be influenced by signs of downward movement in the inflation trajectory, to which the moderation in demand is expected to contribute, and the implications of global developments, RBI said in its 16 September 2011 policy statement. The overall tone of the RBI's September policy was softer than the previous policy announcement which was extremely hawkish.

RBI said on 16 September 2011 that corporate margins moderated across several sectors in Q1 June 2011 compared to levels in Q4 March 2011. However, barring a few sectors, significant pass-through of rising input costs is still visible, RBI said.

Asian shares advanced Monday buoyed by positive export figures from Japan that point toward a recovery from a devastating tsunami earlier this year. Key benchmark indices in South Korea, Hong Kong, Taiwan, Singapore, Japan and Indonesia were up by between 1.38% to 2.87%.

Japan's Finance Ministry said early Monday that exports rose 2.4% in September compared with a year earlier, marking the second consecutive month of growth. The rise follows a five-month decline in the wake of the 11 March 2011 earthquake and tsunami that devastated northeast Japan.

At a summit on Sunday, European Union leaders neared agreement on bank recapitalisation and on how to use the European Financial Stability Facility to stave off bond market contagion.

European leaders will meet Wednesday to hammer out a concrete resolution to the crisis, including ways to fortify the $600 billion bailout fund to help prevent larger economies that use the euro common currency, such as Italy, from being dragged into the crisis. Weeks of intensive discussions by European leaders on the crisis have so far failed to produce a decisive resolution.

A broad rally swept through the US stock markets on Friday after McDonald's and several other large companies reported solid earnings. Gains were also supported by the US Fed Vice Chairman Janet Yellen statement that a third round of large-scale securities purchases might become warranted to boost a US economy facing unemployment and financial turmoil. The Dow Jones industrial average jumped 267.01 points, or 2.3%, to 11,808.79. The S&P 500 gained 22.86 points, or 1.9%, to 1,238.25 and the Nasdaq composite gained 38.84, or 1.5%, to 2,637.46.