Market may edge higher on firm Asian stocks; RBI seen raising rates

The market may extend Monday's (24 January 2011) gains on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 28.50 points at the opening bell. With inflation remaining above Reserve Bank of India (RBI)'s comfort level, market men expect further increase in policy rates from 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 a quarterly policy review today, 25 January 2011.



The Reserve Bank of India (RBI) said in its Macroeconomic and Monetary Developments: Third Quarter Review 2010-11 released a day ahead of the policy review after trading hours on Monday, 24 January 2011, that while downside risks to growth have receded, upside risks to inflation have increased. Since a lower inflation regime is essential for sustainable high growth, containing inflation becomes the dominant policy objective in the current environment, the RBI said. Even if inflation softens in the near-term, sustaining a low inflation regime would require addressing structural rigidities from the supply side in specific sectors, particularly in those items where supply-demand imbalances exert disproportionately larger impact on the headline inflation.

As per provisional figures, foreign funds bought shares worth Rs 63.95 crore and domestic funds bought shares worth Rs 236.51 crore on Monday, 24 January 2011. Foreign funds have dumped shares worth a net Rs 5897.95 crore in this month, as per data from the stock exchanges, with most of their selling absorbed by domestic funds. Domestic funds have bought shares worth a net Rs 4573.05 crore this month.

The near-month January 2011 derivatives contracts expire on Thursday, 27 January 2011. The stock market remains closed on Wednesday, 26 January 2011 on account of Republic Day.

In corporate results, Hindustan Unilever and Sterlite Industries announce their Q3 results today. The results announced so far showed the combined net profit of 377 companies rose 21.9% to Rs 38886 crore on 20.2% rise in sales to Rs 315071 crore in Q3 December 2010 over Q3 December 2009.

Asian stocks rose on Tuesday, 25 January 2011 as US takeovers, share buybacks and dividend prospects drove the Dow Jones Industrial Average to its highest close since June 2008. The key benchmark indices in Hong Kong, Indonesia, Japan , Singapore and South Korea rose by between 0.25% to 1.53%. The key benchmark indices in China and Taiwan fell by between 0.09% to 0.21%.

The US Commerce Department said on Monday it was easing restrictions of exports of high-technology goods to India in recognition of the two countries' stronger economic and national security ties.