Indian stocks likely to open lower: Wednesday Market Preview

A retreat in crude prices and domestic worries pulled the US markets down while ongoing nuclear fears in Japan spooked the Asian pack

Opening after a day’s holiday, the India stock market is likely to open on a tepid note on weak global cues. Wall Street closed lower overnight on retreating crude prices and concerns of the pace of economic recovery. Markets in Asia continued to remain sluggish in early trade on Wednesday, adding to the steep losses seen yesterday. The situation in Japan also kept investors guarded.  The SGX Nifty was down 53 points to 5,745 from its previous close of 5,798.

The domestic market, which was closed yesterday, settled a tad above the day’s lows on Monday with the Sensex at 19,263, down 189 points from Friday's close and the Nifty down 56 points at 5,786.

The US markets closed lower on Tuesday on retreating crude prices and worries about the domestic economy. The US trade deficit contracted in February as imports fell more than exports, according to a government report on Tuesday. Exports, after rising in each of the previous five months, fell 1.4% in February to $165.1 billion and imports fell a larger 1.7% in the month to $210.9 billion. The monthly trade gap totalled $45.8 billion, down from an upwardly revised estimate of $47 billion in January despite another monthly rise in prices for imported oil.

A separate Labor Department report showed imported petroleum prices jumped 10.5% in March, the most since June 2009, after rising 4% percent in February.

Meanwhile, oil prices fell for a second day following a Goldman Sachs forecast calling for a fall of almost $20 in the price of Brent crude oil in coming months. The International Energy Agency also said high prices could curb oil demand. Brent crude for May delivery fell $3.06 to settle at $120.92 a barrel. The May Brent contract expires on Thursday. US May crude futures fell $3.67 to settle at $106.25.

In another development, president Barack Obama will meet US congressional lawmakers on Wednesday before delivering his Budget speech laying out his vision to reduce the long-term US budget deficit.

The Dow tumbled 117.53 points (0.95%) at 12,263.58. The S&P 500 fell 10.30 points (0.78%) at 1,314.16 and the Nasdaq declined 26.72 points (0.96%) at 2,744.79.

Markets in Asia were lower in early trade on Wednesday on the situation in Japan and crude prices. Japanese exporters, Toyota Motor, Honda Motor and Toshiba were in the red on global economic concerns.

The Shanghai Composite fell 0.55%, the Hang Seng declined 0.43%, the Jakarta Composite lost 0.17%, the KLSE Composite was down 0.41%, the Nikkei 225 fell 0.11%, the Straits Times shed 0.02%, the Seoul Composite retreated by 0.18% and the Taiwan Weighted was down 0.21%.

Back home, the global financial crisis had worked to the advantage of India due to its slow and steady development and in the near future for every 10 persons who take up jobs globally, six would be Indians, IT major Tata Consultancy Services said on Tuesday.

TCS CEO and managing director N Chandrasekaran said that over the coming years the world face five major challenges: economic situation of a country, the ageing population, emission problems, prevailing political unrest and terrorism.


IIP and PMI data reveal divergent trends -- which is reliable?

While the HSBC PMI index suggests an expansion in manufacturing activity, government data revealed through the IIP suggests a slowdown in the industrial sector

On 11th April, the Central Statistical Organisation (CSO) of the government released the industrial output data-as measured by the Index of Industrial Production (IIP)-for the month of February 2010. The data showed that industrial growth in February was slower at 3.6% compared to 15.1% in the month a year ago. The government attributed the low numbers to contraction in the manufacturing and mining sectors.

The CSO also revised the IIP for January to 3.95% from the earlier estimate of 3.7%. The decline in fact started in November 2010 (2.7%) and continued through December (2.53%) and thereafter.

The last major jump in industrial production happened in October last year when it expanded by 11.29%. With the country's industrial growth falling from 11.29% in October 2010 to a meagre 3.6% in February this year, this is a sure indicator of a slowdown.

Consequently, overall, the IIP for April 2010-February 2011 period recorded a slippage to 7.8% from 10% in the previous corresponding period.

However, another industrial growth barometer, the HSBC Markit Purchase Managers' Index (PMI)-a private survey of purchasing executives in over 500 manufacturing companies- pegged manufacturing growth at 57.9 for March 2011, unchanged from the previous month. The survey added that despite inflationary pressures in March, the country's manufacturing output has remained intact.

Commenting on the India Manufacturing PMI survey, Leif Eskesen, chief economist for India and ASEAN at HSBC said, "The momentum in India's manufacturing sector held up well in March, suggesting that growth is not an immediate concern. Output growth kept up the pace and the inflow of new orders accelerated, holding promise of a continued strong momentum in output in the months ahead."

While the manufacturing PMI for February was 57.9, it was 56.8 in January, 56.7 in December 2010 and 58.4 in November. A reading above 50 indicates expansion while that below 50 indicates contraction. As the PMI has remained in the positive zone since last November, it indicates that manufacturing growth is still strong.

Looking at the PMI numbers for March 2011, analysts opine that the India's manufacturing sector has benefitted from the initiatives provided by the government in the aftermath of the global slowdown in 2008 and 2009.

On the other hand, optimism expressed by chief economic advisor Kaushik Basu saying that IIP numbers for April will rebound after remaining low in March, looks a bit far-fetched. Besides, comments by Planning Commission deputy chairman Montek Singh Ahluwalia that more than the anticipated growth in the farm sector will make up for the shortfall in industrial output raises many questions.

The IIP numbers are based on broad-based data from government sources, which is often revised later, while PMI presents a more accurate view of the country's manufacturing sector as it is based on a survey of purchasing executives from the manufacturing sector.

Looking at other economic indicators, India's headline inflation for February rose marginally to 8.31% from 8.23% in the previous month. With the headline inflation staying above the 8% mark, the government has been forced to revise the comfort level and has now stated that inflation for March would be around 8.5% (inflation figures for March will be released later this week).

Besides, in a bid to tame rising prices, the Reserve Bank of India (RBI) in its mid-quarter review of the monetary policy last month raised short-term lending and borrowing rates by 25 basis points. This was the eighth time that the central bank raised the rates since March last year.

While the RBI is doing its best to curb liquidity in the system, commerce and industry minister Anand Sharma has voiced concern saying, "I hope that credit will continue to be made available freely, liberally and on good terms to the industry, because investments must go in for capacity building and for additional capacity creation, which the industry is committed to do."


Ketchum acquires majority stake in India’s Sampark PR

Global public relations consultancy, Ketchum has acquired a majority stake in Sampark PR.

Sampark PR, one of the leading PR networks in India, has broad national reach with offices located in Mumbai, New Delhi, Kolkata, Chennai, Bangalore, Pune and Hyderabad and a network of 80 associate offices that extends throughout the country's 25 states, providing greater inroads into India for Ketchum's roster of international client businesses and global brands. In turn, Ketchum will provide greater access to international markets for blue-chip and burgeoning Indian companies and brands, many of which are turning to communications to help build and support their reputations.

Sampark PR was founded in 1994 by Bela Rajan and NS Rajan, who, as director and managing director, will continue to lead the India business and will retain a significant holding in the agency going forward. It will operate as Ketchum Sampark.

Ketchum Sampark handles a combination of Indian domestic clients and Ketchum global network clients across a broad range of industries, including automotive, finance, healthcare, technology and travel, among others.


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