Market may gain for the second straight day on firm Asian stocks; inflation data eyed

The market may gain for the second straight day on firm Asian stocks on end of the crisis in Egypt. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 40 points at the opening bell. The government announces Wholesale price index (WPI) for the month of January 2011 today, 14 February 2011.



As per provisional figures, foreign funds sold shares worth Rs 537.71 crore while domestic funds bought shares worth Rs 519.67 crore on Friday, 11 February 2011.

Tata Motors consolidated net profit jumped 272.9% to Rs 2424 crore on 22% rise in consolidated revenue to Rs 31685 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 result at the fag end of the trading session on Friday, 11 February 2011. Thr stock hads jumped 3.79% on Friday.

Hindalco Industries net profit rose 7.78% to Rs 460.34 crore on 12.53% rise in total income to Rs 6035.22 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result on Saturday, 12 February 2011.

Reliance Capital's consolidated net profit rose 68.28% to Rs 106.32 crore on 8.05 % fall in total income to Rs 1368.90 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result on Saturday.

Reliance Infrastructure (R-Infra), Reliance Communications, Reliance Power, Tata Power, Coal India and Unitech are due to report Q3 results today.

The Q3 December 2010 results season is drawing towards a close. The results announced so far showed that the combined net profit of a total of 2,881 companies rose 21.8% to Rs 85500 crore on 18.9% rise in sales to Rs 921569 crore in Q3 December 2010 over Q3 December 2009.

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.

Asian stocks rose on Monday as investors greeted news of Egyptian President Hosni Mubarak's resignation with relief. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.76% to 1.77%.

Mubarak handed power over to the army, bowing to escalating pressure from the military and protesters demanding he goes. His departure was seen partially reviving investors' appetite for risk. Two weeks of anti-government protests in Egypt sparked concerns the unrest could spread across the Middle East, contributing to volatility in markets and commodity prices worldwide.

U.S. stocks closed out their second straight week of gains on Friday with a rally sparked after Egyptian President Hosni Mubarak resigned, easing tension around the region for now.

Back home in macro news, the latest economic data showed 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 food price index rose 13.07% and the fuel price index climbed 11.61% in the year to 29 January 2011, government data on Thursday 10 February 2011 showed. In the prior week, annual food and fuel inflation stood at 17.05% and 11.61%. The primary articles price index was up 16.24% in the latest week, compared with an annual rise of 18.44% a week earlier.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by the 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 Centre has reportedly sent the empowered committee of state finance ministers yet another draft constitutional amendment on the proposed goods & services tax (GST) in a last-ditch attempt to reach a consensus before the Budget session of Parliament. The third draft reportedly proposes the creation of a GST Council through an Act of Parliament, instead of presidential order, as proposed in the previous draft.

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.