Sensex, Nifty scale over 6-week highs as bank stocks rally

Key benchmark indices reached their highest closing level in more than six weeks on data showing heavy buying of Indian stocks over the past few days by foreign funds. Intraday volatility was high. The barometer index, BSE Sensex, rose 95.27 points or 0.57%, up 127.30 points from the day's low and off 49.47 points from the day's high. The market breadth was negative. Cigarette major ITC dropped on profit taking after reporting strong Q3 results. IT major Wipro rose after strong Q3 results.

The Sensex has jumped 1,284.09 points or 8.3% so far in this month. From a 52-week high of 19,811.14 on 6 April 2011, the Sensex has lost 3,072.13 points or 15.50%. From a 52-week low of 15,135.86 on 20 December 2011, the Sensex has risen 1,603.15 points or 10.59%.



Coming back to today's trade, interest rate sensitive banking stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy. Axis Bank surged after strong Q3 results. Bike makers -- Bajaj Auto and Hero MotoCorp rose after posting strong Q3 result during market hours on Thursday, 19 January 2012. Index heavyweight Reliance Industries (RIL) reversed intraday losses in volatile trade ahead of its board meeting today, 20 January 2012 to consider a proposal for buyback of equity shares along with Q3 December 2011 earnings.

The Sensex and the 50-unit S&P CNX Nifty hit their highest level in more than 6 weeks at the onset of the trading session. The market held firm in morning trade. The market extended gains to hit fresh intraday high in mid-morning trade. The market held firm in early afternoon trade. The market trimmed gains in afternoon trade as index heavyweight and cigarette major ITC fell. The market trimmed gains in volatile mid-afternoon trade. Volatility intensified in late trade as key benchmark indices regained positive zone to hit fresh intraday highs after reversing intraday gains to slip into the red in mid-afternoon trade.

Data showing heavy buying of Indian stocks over the past few days by foreign funds, underpinned sentiments. Foreign institutional investors (FIIs) bought shares worth Rs 626.14 crore on Thursday, 19 January 2012, as per provisional data from the stock exchanges. FII inflow totaled Rs 4441.37 crore in eight trading sessions from 10 to 19 January 2012, as per provisional data from the stock exchanges.

The BSE Sensex jumped 95.27 points or 0.57% to settle at 16,739.01, its highest closing level since 7 December 2011. The index jumped 144.74 points at the day's high of 16,788.48 in late trade. The index lost 32.03 points at the day's low of 16,611.71 in late trade.

The S&P CNX Nifty advanced 30.20 points or 0.6% to settle at 5,048.60, its highest closing level since 7 December 2011. The index hit a high of 5,064.15 in intraday trade. The index hit a low of 5,004.30 in intraday trade.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,526 shares declined and 1,380 shares advanced. A total of 105 shares were unchanged. The breadth was strong earlier in the day.

The BSE Mid-Cap index rose 0.18% and the BSE Small-Cap index gained 0.08%. Both these indices underperformed the Sensex.

The total turnover on BSE amounted to Rs 2937 crore, higher than Rs 2509.13 crore clocked on Thursday, 19 January 2012.

Among the 30-member Sensex pack, 20 gained while the rest declined.

Index heavyweight Reliance Industries (RIL) rose 1.01% to Rs 793.05, off day's low of Rs 772.60. The company's board meets today, 20 January 2012, to consider a proposal for buyback of equity shares along with Q3 December 2011 earnings.

ONGC rose 1.21% and Cairn India fell 0.46%. After market hours on Thursday, 19 January 2012, a joint press release issued by Cairn India and ONGC said that ONGC and Cairn (Rajasthan joint venture) have commenced oil production from the Bhagyam Field in Rajasthan. Bhagyam is the second largest of 25 discoveries made so far by Cairn in the Barmer Basin in Block RJ-ON-90/1.

The Bhagyam reservoir and facilities will entail a gradual and safe ramp up to reach the currently approved plateau rate of 40,000 barrels of oil per day (bopd). The commissioning of Bhagyam is a key milestone towards achieving the target production rate of 175,000 bopd by end FY 2011-12.

The Mangala, Bhagyam and Aishwariya (MBA) fields have gross recoverable oil reserves and resources of approximately one billion barrels. The Rajasthan Joint Venture will contribute more than 20% of current domestic crude production when they reach the currently approved plateau rate of 175,000 bopd.

Auto stocks were mixed. India's second largest bike maker by sales Bajaj Auto jumped 6.54% to Rs 1563 and was the top gainer from the Sensex pack. Profit after tax (PAT) jumped 19% to Rs 795 crore on 21% growth in turnover to Rs 5154 crore in Q3 December 2011 over Q3 December 2010. The company said PAT before exceptional items jumped 25% to Rs 834 crore in Q3 December 2011 over Q3 December 2010. The company announced the results during trading hours on Thursday, 19 January 2012.

Bajaj Auto said in a challenging business environment, the company has improved its operating EBITDA margin from 20.1% in Q2 September 2011 to 21% in Q3 December 2011. The improvement in margin was primarily due to higher realization from exports. The company said its operating EBITDA margin of 21% is the best in the industry.

Bajaj Auto said sales of motorcycles during the festive season were satisfactory. However, towards the end of November 2011, the industry witnessed a slowdown, the company said. The company said the overall demand for commercial vehicles remains strong. Bajaj Auto said exports sales continue to be robust and ahead of the company's plan. Overseas markets now contribute over 35% of Bajaj Auto's vehicle sales. Bajaj Auto said it is on course to exceed its target of 1.5 million of exports for the year ending March 2012 (FY 2012).

India's largest two-wheeler maker by sales Hero MotoCorp gained 2.38%. During market hours on Thursday, 19 January 2012, the company reported 42.89% growth in net profit to Rs 613.03 crore 16.85% growth in turnover to Rs 6031.45 crore in Q3 December 2011 over Q3 December 2010. Hero MotoCorp said it notched up highest ever quarterly turnover (net sales plus other operating income) in Q3 December 2011.

TVS Motor Company gained 2.5% after strong Q3 results from Bajaj Auto and Hero MotoCorp. The company announces Q3 results on 31 January 2012.

India's largest tractor maker by sales Mahindra & Mahindra (M&M) lost 2.43%. Reports on Tuesday, 17 January 2012 indicated the company will reopen bookings for its latest sport-utility vehicle, XUV500, from 25 January 2012 to meet higher demand. M&M in September introduced the XUV500 and received 8,000 bookings within 10 days, prompting it to stop taking fresh orders as it was working on monthly output of 2,000 units.

India's largest small car maker by sales Maruti Suzuki India shed 2.53%. As per recent reports, the company will buy up to 1 lakh diesel engines a year for three years from the local unit of Fiat SpA under a pact between the Italian car maker and Maruti's parent, Suzuki Motor Corp.

Reports early this week indicated that the company has raised prices of most of its vehicle models to offset the impact of higher input costs and a weak rupee. The company has raised prices by between Rs 2,400 and Rs 17,000. The company, however, hasn't raised prices of its mid-sized sedan Dzire.

India's largest truck maker by sales Tata Motors rose 0.62%. Tata Motors' global sales rose 33% to 99,853 units in December 2011 over December 2010. Its UK-based Jaguar Land Rover unit sold 30,981 vehicles in December, up 45% from a year earlier. Sales of Jaguar sedans grew 9% to 4,726 autos while those of Land Rover sport-utility vehicles surged 54% to 26,255 units. Tata Motors said it sold 48,099 trucks and buses globally in December, up 28% from a year earlier.

Exide Industries surged 4.82% after the company said during trading hours today 20 January 2012 that it has entered into technical collaboration and assistance agreements with East Penn Manufacturing Co Inc, USA. Under these arrangements, East Penn will provide technical assistance and support for the manufacture of automotive, motive power, standby, telecom, UPS, solar and traction batteries for Exide's various plants in India. This technical assistance will include a wide range of activities including the enhancement of processes for manufacturing, designs, quality control, and procurement, Exide said in a statement.

Exide also announced during market hours today that its net profit jumped 103.9% to Rs 104.30 crore on 6.3% growth in total income to Rs 1250.22 crore in Q3 December 2011 over Q2 September 2011. Net profit fell 16.17% to Rs 104.30 crore on 19.04% in total income to Rs 1250.22 crore in Q3 December 2011 over Q3 December 2010.

Exide Industries Managing Director and CEO Mr T.V. Ramanathan said that the financial results for the third quarter mark a significant improvement in the company's fortunes vis-à-vis the second quarter. While sales volume of SBU-Automotive remains subdued in both OEM and replacement segments, the volume growth in two-wheeler batteries was nearly 20% during the quarter under review, Exide said. In case of SBU-Industrial, despite significant de-growth in telecom batteries, the overall volume growth for the quarter was nearly 13% due to increased demand for inverter and VRLA batteries. After a sharp surge in operating margin on sequential basis in Q3 December 2011, Exide expects margins to improve further in Q4 March 2012, as the company expects lower volatility of rupee against the dollar.

India's third largest software services exporter by revenues Wipro advanced 2.33%. Before trading hours today, 20 January 2012, Wipro reported 12% growth in net profit to Rs 1456 crore in Q3 December 2011 over Q2 September 2011. The results are as per International Financial Reporting Standards. Wipro expects revenues from IT services business to grow 1% to 3% at $1.52 billion to $1.55 billion in Q4 March 2012 over Q3 December 2011.

Commenting on the third quarter results, Azim Premji, Chairman, Wipro, said, "We continue to execute on our strategy and propel the business towards a higher growth trajectory. The overall macroeconomic sentiments continue to be uncertain and we are monitoring it closely". Suresh Senapaty, Executive Director & Chief Financial Officer, Wipro, said, "Our client mining strategy continues to show progress with 6 customers contributing more than $100 million of revenues. We have improved operating margins through improved revenue productivity and currency benefits".

T K Kurien, Executive Director & Chief Executive Officer of Wipro's IT business, said, "We saw broad based growth with 5 of the 6 verticals growing upwards of 4% in constant currency. Revenues in constant currency exceeded the guidance range. We have seen positive feedback from customers and employees on our restructuring approach".

Shares of two other software pivotals edged lower. India's largest software services exporter by revenue TCS shed 0.09%. After market hours on Tuesday, 17 January 2012, TCS reported 21.8% growth consolidated net profit to Rs 2803 crore on 13.5% growth in revenue to Rs 13204 crore in Q3 December 2011 over Q2 September 2011. The company's management at a post-result conference call said that out of a total of 130 discretionary projects that the company is pursuing, 50% are facing delays in decision making even as there are no project cancellations so far. The management also said that out of a total of 120 top clients surveyed, two-thirds have flat or marginally increased budgets and remaining one-thirds has reduced budgets. The company said the pipeline is intact but discretionary spend may lag ramp up in volumes in Q4 March 2012.

India's second largest software services exporter by revenue Infosys declined 0.46% to Rs 2580, off day's high of Rs 2609.95. The company has given a muted guidance for Q4 March 2012. The company has projected a marginal 1.25% growth in non-annualised earnings per American Depositary Share at $0.81 in Q4 March 2012 over Q3 December 2011. The company has projected a flat to 0.22% growth in consolidated revenue in dollar terms at $1.806 billion to $1.81 billion in Q4 March 2012 over Q3 December 2011. The IT major issued its outlook for the quarter ending March 2012 at the time of announcing Q3 December 2011 results last week.

Cigarette maker ITC slumped 4.14% to Rs 200.20 and was the top loser from the Sensex pack. The stock lost on profit taking after the company reported 22.45% growth in net profit to Rs 1700.98 crore on 15.31% growth in total income to Rs 6532.96 crore in Q3 December 2011 over Q3 December 2010. The result hit the market during trading hours today, 20 January 2012. The stock had witnessed a pre-result rally on expectations of good results. The stock had risen 5.2% to settle at Rs 208.85 on Thursday, 19 January 2011, from a recent low of Rs 198.40 on 2 January 2012.

Interest rate sensitive banking stocks rose on expectations that the Reserve Bank of India will start cutting interest rates in the coming months to prop up slowing economy.

India's largest private sector bank by branch network ICICI Bank galloped 6.35%. The bank unveils Q3 results on 31 January 2012.

India's second largest bank by net profit HDFC Bank rose 0.34%. During market hours on Thursday, 19 January 2012, the bank reported 31.4% growth in net profit to Rs 1429.70 crore on 35.6% increase in total income to Rs 8622.64 crore in Q3 December 2011 over Q3 December 2010.

HDFC Bank said its core CASA deposit ratio, adjusted for one-off current account balance of about Rs 4000 crore, was at 47.7% of total deposits as on 31 December 2011. The private sector bank said its asset quality remains healthy. The bank's capital adequacy ratio (CAR) remained strong at 16.3% as on 31 December 2011, against the regulatory minimum of 9%. The bank's Tier-I CAR was 11.2% as on 31 December 2011.

India's largest commercial bank by net profit and branch network State Bank of India (SBI) gained 2.72%. SBI has received Finance Ministry's approval for a capital infusion of Rs 6000 crore to Rs 8000 crore, a television channel reported early this week, citing the bank's chairman. The capital infusion will be made by 31 March 2012, Pratip Chaudhuri was reported as saying.

Axis Bank jumped 6.97% after net profit rose 23.66% to Rs 1102.27 crore on 44.54% increase in total income to Rs 7206.77 crore in Q3 December 2011 over Q3 December 2010. The result was announced during trading hours today, 20 January 2012.

Union Bank of India jumped 4.65% after the state-run bank said its board will meet on 24 January 2012 to consider issue of equity shares to Government of India on preferential allotment basis. The government's stake in the bank will increase to 58% after preferential issue. The government currently holds 57.07% stake in Union Bank of India.

Bank of India (up 4.82%), Bank of Baroda (up 4.78%), Vijaya Bank (up 2%), Punjab National Bank (up 3.95%), and Kotak Mahindra Bank (up 4.02%) gained.

SKS Microfinance tumbled 5.29% after the company reported net loss of Rs 427.79 crore in Q3 December 2011 as against net profit of Rs 34.15 crore in Q3 December 2010. The result was announced after market hours on Thursday, 19 January 2012.

IFCI fell 2.33% after net profit declined 25.42% to Rs 114.05 crore on 3.6% rise in operating income to Rs 680.44 crore in Q3 December 2011 over Q3 December 2010. The result was announced after market hours on Thursday, 19 January 2012.

Indiabulls Financial Services jumped 6.26%. The company's board will consider Q3 December 2011 results on 30 January 2012.

India's largest coal miner Coal India lost 2.14% after reports citing the Coal Minister Sriprakash Jaiswal indicated the company's new pricing mechanism will be reviewed today, 20 January 2012.

India's largest private sector steel maker by sales Tata Steel rose 0.64%, extending Thursday's 2.4% gains triggered by the company securing a major contract from Siemens Wind Power to supply 25,000 tonnes of high-quality profiled steel plate for wind towers.

During market hours today, 20 January 2012, Tata Steel said promoter firm Tata Sons has exercised the option to convert 1.2 crore warrants into equity shares of the company at a price of Rs 594 per share. The committee of directors at its meeting held on 20 January 2012, has approved the issue of equity shares on conversion of warrants.

India's largest sponge iron steel maker by capacity Jindal Steel & Power (JSPL) rose 3.32%. JSPL, after market hours on Wednesday, 18 January 2012, reported 7% growth in consolidated net profit to Rs 1015.88 crore on 37% growth in net sales to Rs 4357.69 crore in Q3 December 2011 over Q3 December 2010. The company's power generation arm -- Jindal Power reported net profit of Rs 481.32 crore on turnover of Rs 881.40 crore in Q3 December 2011. Jindal Power had plant load factor of 102.13% in Q3 December 2011.

JSPL has commissioned 2 units of 135 megawatts (MW) -- one unit at Dongamahua in Raigarh, Chhattisgarh and another unit at Angul in Odisha. With this total 6 units have been commissioned in series of total 10 units of 135 MW, JSPL said.

JSW Steel fell 2.89%. During market hours today, 20 January 2012, the company reported 55.99% fall in net profit to Rs 168.24 crore on 36.1% growth in net sales to Rs 7859.62 crore in Q3 December 2011 over Q3 December 2010.

Hindustan Zinc was up 0.04%. The company during market hours today, 20 January 2012 reported 1.23% fall in net profit to Rs 1273.60 crore on 5.58% growth in net sales to Rs 2746.77 crore in Q3 December 2011 over Q3 December 2010.

India's largest power equipment maker by sales Bhel gained 3.63%, reversing Thursday's 2.71% decline. The company unveils its Q3 results on 27 January 2012.

India's largest engineering and construction firm by outstanding order book L&T rose 0.02%, extending Thursday's 2.49% advance.

Suzlon Energy climbed 8.13%, extending Thursday's 2.7% gains triggered by the company's subsidiary securing cumulative orders of 151 megawatts across Europe and North America from 22 October 2011 to 18 January 2012.

India's largest realty firm by net profit DLF rose 1.88% extending Thursday's 4.62% gains triggered by reports the company is planning to sell a convention centre project in Delhi and its wind power business for about Rs 1800 crore early next fiscal to reduce debt.

KNR Constructions rose 2.30% after the company along with its joint venture partner Sri Lakshmi Metal Industries secured an order worth Rs 206.69 crore from Andhra Pradesh state government. The announcement was made after trading hours on Thursday, 19 January 2012.

Indiabulls Real Estate spurted 9.22%. The company's board will consider Q3 December 2011 results on 24 January 2012.

Jet Airways (India) lost 5.15%. After market hours today, 20 January 2012, the company posted a net loss of Rs 101.22 crore in Q3 December 2011 as compared to net profit of Rs 118.23 crore in Q3 December 2010. Total income rose 18.55% to Rs 4165.88 crore in Q3 December 2011 over Q3 December 2010.

Ador Welding lost 4.87% after net profit fell 47.3% to Rs 2.98 crore on 11.3% growth in net sales to Rs 78.21 crore in Q3 December 2011 over Q3 December 2010. The company announced the results after market hours on Thursday, 19 January 2012.

Godrej Properties shed 0.82%, reversing intraday gains. Consolidated net profit jumped 84.4% to Rs 28.62 crore on 149% growth in total income to Rs 169.90 crore in Q3 December 2011 over Q3 December 2010. The company announced the results after market hours on Thursday, 19 January 2012.

Tata Coffee rose 0.52% after Starbucks, the world's largest coffee company, reportedly said it would roll out its first store in India this year in tie-up with the company.

Pantaloon Retail (India) galloped 7.19%. The Government on 10 January 2012 notified 100% foreign direct investment (FDI) in single brand retail, opening decks for setting up shop by global retail chains like Ikea, Louis Vuitton, Cartier, Armani, Rolex, Adidas and Gucci to have full ownership of their India operations. The move frees up the 51% limit that had been in place and proved to be a dampener on plans by such companies to enter India.

However, the notification comes with some riders to protect the interests of the small and medium scale units in the country. The notification states that in respect of proposals involving FDI beyond 51%, the mandatory sourcing of at least 30% would have to be done from the domestic small and cottage industries, which have a maximum investment in plant and machinery of $1 million (about Rs 5 crore).

ICICI Bank was the top traded counter on the BSE with turnover of Rs 136.84 crore followed by SBI (Rs 126.50 crore), RIL (Rs 76.79 crore), Axis Bank (Rs 72.60 crore), and Max India (Rs 65.60 crore).

Cals Refineries clocked highest volume of 1.32 crore shares on BSE. Suzlon Energy (1.03 crore shares), Sterling Biotech (84.45 lakh shares), Indiabulls Real Estate (52.44 lakh shares) and IFCI (49.70 lakh shares) were the other volume toppers in that order.

Investors' focus is currently on Q3 results. Analysts expect weak Q3 December 2011 results due to lower volume growth in a slowing economy, higher raw material costs and higher interest charges. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year.

UltraTech Cement, Asian Paints, Zee Entertainment Enterprises and Godrej Consumer Products unveil Q3 results tomorrow, 21 January 2012. L&T, Maruti Suzuki India, Sterlite Industries (India), Idea Cellular, GAIL (India) and Kotak Mahindra Bank unveil Q3 results on 23 January 2012.

Cairn India, Grasim and Biocon unveil Q3 results on 24 January 2012. Bank of Baroda, Sesa Goa, Union Bank of India, Rural Electrification Corporation, Indian Hotels and Tata Communications unveil Q3 results on 25 January 2012. Bharat Heavy Electricals (Bhel), NTPC, Bank of India, Pfizer and Canara Bank unveil Q3 results on 27 January 2012. LIC Housing Finance, Indian Bank, Corporation Bank and NMDC unveil Q3 results on 30 January 2012.

ICICI Bank, Punjab National Bank, Dabur India, TVS Motor and Siemens unveil quarterly results on 31 January 2012. Mahindra Satyam announces Q3 reusults on 1 February 2012. ONGC and Marico announce Q3 results on 2 February 2012. Dr. Reddy's Laboratories, Power Finance Corporation and HPCL report Q3 results on 3 February 2012. India Cements announces Q3 results on 6 February 2012. Mahindra & Mahindra unveils Q3 results on 7 February 2012. Hindalco unveils Q3 results on 9 February 2012. Tata Power and BPCL unveil Q3 results on 10 February 2012. Aditya Birla Nuvo and Ashok Leyland announce Q3 results on 11 February 2012. Shipping Corporation of India announces Q3 results on 14 February 2012.

Stronger-than-expected growth in industrial production in November 2011 has raised doubts about the timing and pace at which the Reserve Bank of India would likely ease its monetary policy. Industrial output rose 5.9% in November 2011, compared with a revised contraction of 4.74% in October 2011, data released by the government on 12 January 2012, showed. Manufacturing output, which constitutes about 76% of the industrial production, grew an annual 6.6% in November 2011. Industrial production had contracted in October 2011, snapping consistent growth for the preceding 29 months in a row.

The Reserve Bank of India (RBI) is widely expected to keep its key lending rate viz. the repo rate steady at the Third Quarter Review of Monetary Policy 2011-12 on Tuesday, 24 January 2012, as headline inflation remains high. Data released early this week showed headline inflation eased to two-year low of 7.47% in December 2011 from 9.11% in November 2011. But prices of manufactured products -- a key gauge of core inflationary pressures -- remained elevated.

At its mid-quarterly monetary policy review meet on 16 December 2011, the RBI left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI had said in a statement on 16 December 2011. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI had said.

RBI had said inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. RBI also said that the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

The budget for 2012/13 ending March will be presented after elections scheduled in five states, Finance Minister Pranab Mukherjee said on 2 January 2012. State elections are scheduled between the end of January and early March 2012. The annual budget is usually presented on the last working day of February. The Election Commission on 24 December 2011 announced the dates for the assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa. Uttar Pradesh will have polling on February 4, 8, 11, 15, 19, 23 and 28, while Uttarakhand and Punjab will go to polls on January 30. Manipur will have polls on January 28 and Goa on March 3.

European markets were mixed on Friday, 20 January 2012, with focus on ongoing debt talks between Greece and its private creditors. Key benchmark indices in Germany and France were down 0.50% and 0.53%. UK's FTSE 100 rose 0.03%.

A Greece finance ministry official told reporters on Wednesday, 18 January 2012, that Greece's government could forge an agreement with private creditors by the end of this week after talks resumed in Athens on Wednesday, 18 January 2012 between Greece government and its creditors. Negotiations had collapsed last Friday over the interest rate on new bonds to be offered by Greece.

France and Spain held successful bond auctions on Thursday, easing concerns about the debt crisis in Europe.

Asian stocks rose on Friday, 20 January 2012, as strong earnings and positive jobs data out of the US added to hopes that the economic recovery in the world's largest economy is for real. Key benchmark indices in Hong Kong, Singapore, China, South Korea and Japan were up by between 0.84% to 1.82%. Indonesia's Jakarta Composite shed 0.36%. The stock market in Taiwan remains closed for Lunar New Year holidays. The market re-opens directly on 30 January 2012.

Preliminary results from HSBC's China manufacturing survey showed little improvement in January 2012, with weakness in output and new orders suggesting a deepening slowdown ahead, setting the stage for further monetary policy easing. The Purchasing Managers' Index "flash" reading -- which includes the initial 85%-90% of responses -- printed at 48.8 on a 100 point scale, up from December's final reading of 48.7, HSBC said in a statement Friday. HSBC economist Hongbin Qu said the result would weigh on the minds of policy makers seeking to stave off a overly sharp deceleration, even as recent data showed the economy so far avoiding an abrupt decline, with the moderation unfolding in gradual but sustained manner.

While the reading represented a three-month high, it also marked the third straight month below the 50 level which indicates manufacturing conditions are contracting.

A Chinese purchasing managers' index signaled manufacturing may contract for a third month as a slowing economy boosts the case for the government to further loosen credit controls. The preliminary January reading of 48.8 for the gauge, released by HSBC Holdings Plc and Markit Economics today, compares with a final 48.7 number for December. The dividing line between contraction and expansion is 50.

The Chinese markets are closed for the whole of next week, while Hong Kong bourses are shut from Monday, 23 January 2012 to Wednesday, 25 January 2012, for Lunar New Year holidays.

Trading in US index futures indicated that the Dow could fall 14 points at the opening bell on Friday, 20 January 2012. US indices advanced for the third consecutive day on Thursday, pushing major indices to a six-month high, on upbeat jobs data and banking results. The Dow Jones Industrial Average rose 45.03 points, or 0.36%, to 12,623.98. The Standard & Poor's 500 Index gained 6.46 points, or 0.49%, to 1,314.50 and the Nasdaq Composite index climbed 18.62 points, or 0.67%, to 2,788.33.

The Federal Open Market Committee (FOMC) holds a meeting on US interest rates on 24-25 January 2012. FOMC has held its funds rate target inside a record-low range of 0% to 0.25% since December 2008. The committee at its past four policy meetings indicated it intends to hold the rate stable until at least the middle of 2013.

The International Monetary Fund said recently it is proposing to raise its lending capacity by as much as $500 billion to safeguard the global economy.