Market may extend recent strong gains

The market may gain for the sixth straight day tracking firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 20 points at the opening bell.

As per provisional figures, foreign funds bought shares worth Rs 37.99 crore and domestic funds bought shares worth Rs 244.40 crore on Thursday, 17 February 2011.



The Central Bureau of Investigation (CBI) on Thursday questioned Essar Group CEO Prashant Ruia in connection with the company's alleged role in conniving with Loop Telecom to get 2G licences in 21 circles in January 2008.

Intensifying its investigation into the 2G spectrum allocation scam, ahead of the 1 March 2011 deadline set by the Supreme Court, the CBI questioned Ruia about Essar's alleged connection with Loop Telecom.

Issuing a press statement, Essar said: "Essar is in full compliance with DoT license norms and all other applicable laws. As and when any information is sought Essar will provide the same to the authorities."

Ruia's questioning comes a day after Anil Dhirubhai Ambani Group (ADAG) chairman Anil Ambani's "meeting" with the CBI officials in the national capital. It is learnt that Ambani was confronted with former telecom minister A. Raja and they were questioned together. The investigating agency has thus far questioned top officials of telecom and real estate firms including Unitech Ltd, DB Realty Ltd, Tata Realty and Infrastructure , S-Tel and Loop Telecom as part of its investigation into the 2G allocation.

Asian markets rose on Friday extending solid gains this week. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.02% to 1.9%. China's Shanghai Composite fell 0.29%.

U.S. investors piled on a dizzying two-year advance in stocks on Thursday, using a brief slip on negative economic news as an opportunity to buy into market leaders.

Data showed U.S. core consumer prices rose at the quickest pace in 15 months in January. A separate report showed factory activity in the U.S. Mid-Atlantic region rose in February to its highest since January 2004, with an employment subindex reaching its highest point since April 1973.

The world's top central bankers will take centre stage on Friday ahead of a G20 meeting which appears set to struggle to make headway on an ambitious French agenda.The monetary policy chiefs of the United States, euro zone, China, Japan and Britain will share a public platform in Paris, with their notable policy differences and worries about resurgent inflation of key interest to financial markets.

Back home in macro news, food inflation eased to a two-month low in early February 2011 on moderating prices of onions and other vegetables. The food price index rose 11.05% and the fuel price index climbed 11.92% in the year to 5 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 13.07% and 11.61%. The primary articles price index was up 14.59% in the latest week, compared with an annual rise of 16.24% a week earlier.

The headline inflation eased slightly in January 2011 on some moderation in prices of manufactured products. The wholesale price index (WPI), rose 8.23% in January 2011 from a year earlier. The index had risen 8.43% in December 2010. Food prices in the WPI index jumped 15.7% in January compared with 13.6% rise in December.

The industrial output in December 2010 rose a slower-than-expected 1.6% from a year earlier. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 1%, the statistics office said in a statement. Growth in industrial output in November 2010 was revised upwards to 3.62% from earlier 2.7%

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations. The Finance Minister may announce a new road map for the Goods & Services Tax (GST). The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

The government may also announce some populist measures in the Budget given that assembly elections are due in Kerala, Tamil Nadu, West Bengal and Assam. In all these states, the Congress is potentially looking to regain power or to retain it.

On the corporate earnings front, there are concerns of slowdown in corporate profit growth going ahead. With the rise in key policy rates by the Reserve Bank of India (RBI) recently, interest cost will only rise in the coming quarters that could hurt earnings going forward. If raw material costs keep rising at a fast clip, companies will feel the heat of slowing sales growth and rising cost of operations that could start eating into profit growth.