Market may edge higher on firm Asian stocks

The market may edge higher tracking gains in Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 35 points at the opening bell. Foreign institutional investors (FIIs) sold shares worth Rs 554.03 crore and domestic institutional investors (DIIs) bought shares worth Rs 161.01 crore on Tuesday, 26 April 2011.

Volatility may remain high on the bourses in the near term as traders rollover positions in the futures & options (F&O) segment ahead of the expiry of the near-month April 2011 contracts on Thursday, 28 April 2011.



Wipro announced before the market hours today that consolidated net profit as per International Financial Reporting standards (IFRS) 14% to Rs 1375 crore on 18% rise in total revenues to Rs 8302 crore in Q4 March 2011 over Q4 March 2010.

Azim Premji, Chairman of Wipro, commenting on the results said, "We have made good progress in creating a leaner, simpler and more customer centric organization structure. We believe our business strategy along with the new structure will deliver industry leading growth. Suresh Senapaty, Executive Director & Chief Financial Officer of Wipro, said, "The business environment is positive and we are focusing on growth by directing investments on momentum verticals. We have announced wage hikes effective 1 June, 2011, which would have an impact on the operating margins."

T K Kurien, Executive Director & Chief Executive Officer, IT Business, Wipro said, "Our journey of building the new Wipro is based on the foundation of customer focus, domain and technology leadership directed towards the customer needs and providing enriching career opportunities for our employees."

Wipro expects revenues from IT services business to register a between a 1.27% growth to 0.7% fall at between $1.394 billion to to $1.422 billion in Q1 June 2011 over Q4 March 2011.

The near term major trigger for the market is Q4 March 2011 results of India Inc. Investors will scrutinize post-result management commentary to gauge outlook on earnings at a time when rising salaries, raw materials prices and interest rates are pressurizing profit margins of India Inc. High global commodity prices will add to pressure on profit margins of Indian firms.

The combined net profit of a total of 221 companies rose 25.4% to Rs 23267 crore on 29.5% rise in sales to Rs 197258 crore in Q4 March 2011 over Q4 March 2010.

A good news on the macro front is that the India Meteorological Department (IMD) has predicted the southwest monsoon 2011 to be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. IMD has indicated that there is very low probability for the season rainfall to be deficient (below 90% of LPA) or excess (above 110% of LPA). The IMD released its initial forecast for the June to September monsoon on Tuesday 19 April 2011. The forecast is made in two stages in April and in June. The forecast for the season as a whole (June-September) is issued in the first stage.

Normal monsoon this year could help ease food inflation and boost rural income. The quantity and geographical spread of rainfall during the monsoon season is crucial for India's agriculture sector as the country lacks irrigation facilities on more than half of its farm land. The South Asia Climate Outlook Forum predicted that South Asia is likely to receive normal monsoon rains in 2011. It said the La Nina weather phenomenon, which aids monsoon in the region, would continue until June.

Nine of 14 economists polled by Capital Market expect 25 basis points (bsp) hike in key short-term interest rates and 5 expect 50 basis points hike in short-term rates on 3 May 2011 when the Reserve Bank of India (RBI) undertakes its annual 2011-2012 monetary policy review. A cumulative hike of 75-100 bsp in short-term rates is expected during the financial year ending March 2012 (FY 2012). Economists expect inflation based on the wholesale price index (WPI) to slide to a median 7.8% in FY 2012 from 9.4% in the year ended March 2011 (FY 2011). The poll shows that economists expect inflation to remain high in the first half of the year and slide in the second half of the year.

A sharp surge in global crude oil prices over the past few months has raised macroeconomic worries. India imports majority of its crude oil requirements and high oil prices had raised concerns about widening current account deficit. High oil prices had also raised concerns about higher oil subsidy bill for the government and its negative impact on the government's fiscal position. US crude futures were down 18 cents or 0.16% at 112.03 a barrel.

Asian stocks rose on Wednesday after a report showed US consumer confidence increased, boosting the outlook for Asian exporters. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korean and Taiwan rose by between 0.17% to 1.29%.

Standard and Poor's on Wednesday lowered the outlook for Japan's sovereign rating to negative. The rating agency affirmed its long-term rating on Japan at AA minus. "Standard and Poor's expects costs related to the March 11, 2011, earthquake, tsunami, and nuclear power plant disaster will increase Japan's fiscal deficits above prior estimates by a cumulative 3.7% of GDP through 2013," the rating agency said in a statement. "We revised the outlook on the long-term rating on Japan to negative to reflect the potential for a downgrade if fiscal deterioration materially exceeds these estimates in the absence of greater fiscal consolidation" it said.

A fresh batch of corporate results pushed US stocks to their best levels since June 2008 on Tuesday, renewing optimism that profit growth will remain resilient enough to keep equities on the rise. US consumer confidence rose in April as inflation expectations eased somewhat and consumers felt better about the short-term outlook, according to a report from the Conference Board, a private-sector group. The data helped ease concerns that the recent rise in oil prices have started to hit shoppers.

Investors will parse the US Federal Reserve's policy statement and every word Fed Chairman Ben Bernanke says in a news conference that follows a two-day meeting of the Fed on interest rates on Tuesday-Wednesday (26-27 April 2011). Global markets will react favorably to some indication that the Fed feels inflation is under control, and recent spikes are only temporary. Any signs of worry about rising prices will telegraph a faster end to the ultra-low rate policy.

Another reason why the Fed policy is in focus is because the US central bank's Treasury-buying program -- its second round of quantitative easing, or QE2, is scheduled to end in June 2011.