Market may extend recent losses on weak Asian stocks; food inflation data eyed

The market may extend recent steep losses on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 57.50 points at the opening bell. Asian stocks declined on Thursday, 17 November 2011, as worries about Europe's debt troubles worked to depress sentiment across the region.

Key benchmark indices fell for the fifth straight day on Wednesday, 16 November 2011 on weak Q2 September 2011 corporate earnings. The BSE Sensex lost 106.80 points or 0.63% to settle at 16,775.87, its lowest closing level since 18 October 2011. The combined net profit of a total of 3,500 companies declined 35.8% to Rs 67594 crore on 20.7% growth in sales to Rs 1132647 crore in Q2 September 2011 over Q2 September 2010. The Q2 earnings season got over on Tuesday, 15 November 2011.



Foreign institutional investors (FIIs) sold shares worth Rs 488.89 crore on Wednesday, 16 November 2011 as per the provisional data from the stock exchanges. FII outflow totaled Rs 898.66 crore in two trading sessions from 15 and 16 November 2011, as per data from the stock exchanges.

Oil exploration firms, PSU OMCs and airliner stocks will be in focus as US crude oil prices surged on Wednesday to settle above $100 a barrel for the first time since June 2011.

The Union Cabinet on Wednesday cleared the pension bill but decided not to limit foreign direct investment in the sector, retaining the flexibility to prescribe or change limit through an executive decision. The government will place the Pension Fund Regulatory and Development Authority Bill 2011 in the winter session of Parliament which begins next week.

The government will today, 17 November 2011, 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 5 November 2011.

The Reserve Bank of India (RBI) has announced its first government bond buyback under its open-market-operations program this year, in a move aimed at easing liquidity in the cash-strapped banking system. The plan to buy up to Rs 10000 crore of government bonds on 24 November 2011 comes as banks have been borrowing between Rs 80000 crore and Rs 1.3 lakh crore daily for the past week, underscoring the cash crunch in the local banking system. The Reserve Bank of India said it will buy the bonds through a multi-security auction using the multiple price method. It will announce the details of the bonds that it will buy back at the auction shortly, it added.

The latest data showed that inflation remains uncomfortably high in India. Inflation, as measured by the wholesale price index (WPI), stood at 9.73% in October 2011, as against 9.72% in September 2011, the latest data showed. The annual inflation rate was at 9.08% during the corresponding month of the previous year. The government left unchanged inflation rate for August at 9.7%.

Industrial production grew 1.9% in September 2011 from a year earlier, far below market expectations, reflecting weakening economic activity due to the central bank's aggressive tightening of monetary policy. The reading was also significantly lower than the revised 3.5% industrial output growth in August, government data showed on Friday, 11 November 2011.

Manufacturing output, which has a 75.5% weight in the index, rose 2.1% year on year in September, compared with a revised 4% increase in August. Mining output shrank 5.6%, compared with a revised 4.1% contraction in August. Capital goods output in September shrank 6.8% from a year earlier after rising 4.0% in August.

India's October exports rose an annual 10.8% to $19.9 billion, while imports for the month rose 21.7 percent to $39.5 billion, the trade secretary said on Tuesday, citing provisional data. India's trade deficit in October is seen at $19.6 billion, the highest in four years, Rahul Khullar said. At this rate, the trade deficit for the year could breach the $150 billion mark, he added.

India's service sector contracted for a second straight month in October, as new business grew at its weakest pace since May 2009, dragged by sagging global demand and tight monetary policy, a survey showed on Thursday, 3 November 2011. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of around 400 firms, slumped to 49.1 in October, its lowest reading in two-and-a-half years and below the 50-mark which separates growth from contraction. It was at 49.8 in September.

India's manufacturing activity in October expanded--though modestly--indicating an improvement in business conditions from a month ago as growth in new orders accelerated, a survey showed Tuesday, 1 November 2011. The seasonally adjusted HSBC Purchasing Managers' Index, prepared by Markit, rose to 52 in October from 50.4 in September. A figure above 50 indicates expansion.

India needs to guard against imported inflationary pressure as the euro-zone continues to reel under the debt crisis, Prime Minister Manmohan Singh said on Wednesday, 2 November 2011. "In an increasingly interdependent world, we have to be wary of contagion effects," Mr. Singh said in a statement before his departure to attend a conference of the Group of 20 industrial and developing economies in Cannes, France.

RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably.

Mr. Sudipto Mundle, a member of the Reserve Bank of India's technical advisory committee on monetary policy, on 3 November 2011 said he expects inflation to ease in the January-March quarter as global commodity prices will begin to cool by then, helped by a favorable base. However, it will still overshoot the RBI's March-end projection of 7%, possibly ending the fiscal year at as high as 8%, he added. Mr. Mundle expects the economy to grow 7%-7.5% this fiscal year, below the RBI's 7.6% forecast.

Emerging markets such as India must take measures to boost long-term foreign direct investment to blunt volatility in exchange rates, and any capital control measures must be selective and temporary, a senior executive of the Asian Development Bank said on Monday, 14 November 2011. While capital flows and exchange rates are likely to be volatile in the short-term amid ongoing euro-zone debt concerns, India must focus on improving its investment climate by providing better infrastructure, putting in place a coherent manufacturing policy and developing financial markets, Managing Director General Rajat M. Nag said on the sidelines of the India Economic Summit.

Nag said achieving India's fiscal deficit target would be difficult, but achievable. "We are pleased with the planned approach to fiscal consolidation which is essentially improving the targeting of subsidies rather than curtailing critical investment in infrastructure," he said

Asian stocks declined on Thursday, 17 November 2011, as worries about Europe's debt troubles worked to depress sentiment across the region. Key benchmark indices in Hong Kong, Indonesia, Singapore, Japan, and Taiwan fell by between 0.32% to 0.74%. Key benchmark indices in China and South Korea rose by between 0.01% to 0.11%.

Asia-listed shares have been hit this week by further worries about Europe's debt crisis expanding to other members of the euro zone, as bond yields for some nations rose. Spain is scheduled to sell as much as 4 billion euros of bonds due 2022 toady, 17 November 2011. France will today, 17 November 2011, auction notes maturing from 2013 to 2016.

US stocks fell on Wednesday, with selling accelerating late in the session on more warnings about the potential impact of the euro zone's debt crisis on the global economy and the banking system. Losses deepened after ratings agency Fitch said even though the outlook on the US banking industry is stable, it could worsen if the euro-zone's debt crisis is not resolved quickly. Earlier, Moody's cut ratings on various German public sector banks, citing a lower likelihood of external support if it were required.