Market may decline on weak Asian stocks; food inflation data eyed

The market may decline extending Wednesday's losses tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a fall of 38 points at the opening bell.

On the macro front, the government will unveil data on some wholesale price indices for the year through 8 January 2011 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST. The high food inflation is being driven by supply bottlenecks and rising incomes, Finance Minister Pranab Mukherjee said in a statement on Wednesday. Mukherjee has also asked state governments to review their local taxes on food products, the statement added.



As per provisional data on NSE, foreign funds sold shares worth Rs 270.38 crore while domestic funds bought shares worth Rs 488.53 crore on Wednesday.

Asian quities fell on Thursday on poor U.S. housing data. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.41% to 1.3%.

China's annual gross domestic product growth sped up in the fourth quarter to 9.8% from 9.6% in the third quarter, the National Bureau of Statistics (NBS) said on Thursday

US stocks skidded on Wednesday, 19 January 2011 after disappointing results by Goldman Sachs Group Inc and Wells Fargo & Co. The new U.S. homes fell more than expected in December to the lowest in over a year, the Commerce Department said.

Back home, on the political front, a reshuffle of the Union cabinet on Wednesday saw no major change in the key ministries of finance, home, defence and foreign affairs. Oil Minister Murli Deora was replaced as also Roads Minister Kamal Nath, who was seen as moving slow on boosting infrastructure. Ashwani Kumar is new Ministers of State, Planning and Parliamentary Affairs and Science and Technology and Earth Sciences. K C Venugopal is new Ministers of State, Power.

Ajay Maken and K V Thomas have been elevated as Ministers of State with independent charge. Beni Prasad Verma has been inducted as MoS with Independent Charge. M S Gill has been moved from Sports and Youth Affairs Ministry to Statistics and Programme Implementation. Virbhadra Singh shifted from Steel to Micro, Small and Medium Enterprises while Vilasrao Deshmukh has been shifted from Heavy Industries and Public Enterprises to Rural Development with additional charge of Panchayati Raj.

The cabinet reshuffle was seen as Prime Minister Manmohan Singh's mid-term effort to refresh a coalition government snared by corruption scandals and year-high food inflation as it faces key state elections.

The initial Q3 earnings have been a mixed bag. After disappointing Q3 results from IT bellwether Infosys, which also gave a muted guidance for Q4 March 2011, IT giant TCS reported stronger-than-expected results. Bajaj Auto reported strong Q3 result on Wednesday, 19 January 2011. Housing finance major HDFC came out with decent Q3 results, which also showed asset quality remain strong. Engineering & construction major L&T expects revenue growth to remain strong over the medium term on a healthy order book. The company also said while it is facing a substantial increase in the cost of raw materials such as steel and copper, margins are expected to remain healthy. Private sector bank Axis Bank has reported strong Q3 results, with asset quality remaining healthy.

On the macro front, high food prices have raised fears of aggressive hike in policy rates by the central bank in 2011. As per a poll by Capital Market, economists widely expect 25 basis points increase each in repo rate and reverse repo rate at 25 January 2010 policy review. Reserve Bank of India governor Duvvuri Subbarao said on Monday, 17 January 2011, that the country is facing surging inflation and that the RBI needs to calibrate monetary policy in order to manage inflation and also support growth.

The wholesale price index (WPI) rose an annual 8.43% in December 2010 on higher food prices, government data showed on Friday, 14 January 2011. The annual reading for October 2010 was revised upwards to 9.12% from 8.58%.