Market may extend losses on weak Asian stocks; food inflation data eyed

The market may extend Wednesday's losses tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 15.50 points at the opening bell. Foreign institutional investors (FIIs) bought shares worth Rs 50.43 crore and domestic funds bought shares worth Rs 85.47 crore on Wednesday, 8 June 2011, as per provisional figures released by the stock exchanges.

The key benchmark indices edged lower on Wednesday snapping last two days' gains on weak global stocks, which fell after Federal Reserve chairman Ben Bernanke on Tuesday, 7 June 2011, said US economic recovery was proving to be "uneven" and "frustratingly slow". The BSE Sensex lost 101.33 points or 0.55% to 18,394.29, its lowest closing level since 3 June 2011 on Wednesday.



On the macro front, the government will today, 9 June 2011, unveil data on some wholesale price indices viz. the food price index, the primary articles index and the fuel price index for the year through 28 May 2011.

Auto and PSU OMCs will be in focus on reports the government has yet again deferred a decision on raising prices of diesel, kerosene and cooking gas, needed to rein in the fiscal gap, as it deals with one of the worst political crises in recent years. It was the third time in two months that Prime Minister Manmohan Singh's government has sidestepped a decision on lifting the state-set prices, fearful of stoking inflation at a time when public anger is running high over high profile graft scandals.

In macro news, the services sector expanded at its slowest pace in 20 months in May 2011 as soaring prices and interest rate hikes gnawed at new business growth and reduced the level of optimism, a survey showed last week. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of over 400 Indian firms, slipped to 55 in May 2011 from 59.2 in April 2011, marking its twenty-fifth successive month above the 50 level that divides growth from contraction.

Growth in India's manufacturing sector eased slightly in May as the pace of new orders slowed, but factories' input and output prices continued to rise sharply. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 companies, edged down to 57.5 in May from 58.0 in April, weighed down by a slower expansion rate for new orders and a labour shortage, data showed last week.

Most Asian stocks slipped for a sixth straight day on Thursday as investors cut exposure to risky assets on signs the global economy is losing steam. The key benchmark indices in Japan, Hong Kong, South Korea China fell by between 0.17% to 0.65%. The key benchmark indices in Singapore, Indonesia, and Taiwan were up by between 0.01% to 0.13%.

U.S. stocks extended losses for the sixth straight day on Wednesday as investors worried that a slowing economy could deepen the market's retreat.

The Federal Reserve's second round of quantitative easing or QE2, a temporary policy designed to increase the money supply, keep interest rates low and stimulate the economy, ends on 30 June 2011. A section of the market has been speculating about the possibility of a third quantitative easing program by the Fed after the current one expires in June 2011.