Indian stocks likely to open sideways: Friday Market Preview

RBI governor D Subbarao yesterday said it would be difficult to achieve the fiscal deficit target of 4.6% for 2011-12 in view of the impact of rising crude oil and fertiliser prices in the international market

The local market is likely to open on sideway on mixed earnings reports from corporates on Thursday. The Reserve Bank of India (RBI) on Thursday once again reiterated that inflation was still ‘very high’ and hinted that it would take more steps in its policy meeting next month.

On the global front, US stocks ended higher yesterday as debutant LinkedIn ended higher in trade. The markets were weak earlier weighed down sluggish economic news but LinkedIn changed the outlook. Markets in Asia were mostly higher but the gains were capped by a decline in commodity prices. The SGX Nifty was up six points at 5,440 compared to its previous close of 5,434.

The market opened positive on Thursday, tracking gains across Asia. The Sensex started at 18,167, while the Nifty opened at 5,448, the identical opening level seen on Wednesday. A rise in commodity prices in the international market supported gains in metals and oil & gas stocks in early trade. Banking stocks were also in demand, after being down for two days following the dismal numbers by the State Bank of India. Market performance was range-bound and the indices stayed within Wednesday's high and low. The Sensex closed 55 points up at 18,141 and the Nifty closed eight points up at 5,428.

The market remained range-bound, even as weekly food inflation numbers for early May came in lower at 7.47%. Turnkey engineering major Larsen & Toubro’s better-than-expected numbers helped the company's stock take the top gainer's position on the Sensex, though the market seemed to overlook the development.

The intra-day movement on the Sensex was between 18,058 and 18,198 while the Nifty traded between 5,411 and 5,453. The Nifty will strengthen for a few days only above 5,450.

Wall Street closed higher overnight as debutant LinkedIn settled higher despite mixed economic news. LinkedIn soared to an intra-day high of $121.97—as much as 171% above its initial offer price of $45. The shares ended at $94.25, up 110%.

In economic news, the Philadelphia Federal Reserve Bank said its business activity index slumped to 3.9 from 18.5 in April, more than economists’ estimates for a reading of 20. The Bloomberg Consumer Comfort Index declined to minus 49.4 in the period to 15th May, the worst reading since August, from the previous week’s minus 46.9. Other reports revealed an unexpected decline in existing home sales for April, while jobless claims fell but showed the trend in employment remains weak.

The Dow advanced 45.14 points (0.36%) to 12,605.32. The S&P 500 added 2.92 points (0.22%) to 1,343.60 and the Nasdaq rose 8.31 points (0.30%) to 2,823.31.

Most markets in Asia were trading higher, but with marginal gains as a decline in commodities capped the gains. Japanese stocks were supported by a decline in the yen against the dollar. In related news, the Bank of Japan is expected to hold rates steady in its meeting today. On the other hand, the Singapore government revised up its 2011 forecast range for gross domestic product growth to 5%-7% from the previous forecast of 4%-6%, citing modest recovery in developed economies and healthy Asian growth.

The Shanghai Composite gained 0.07%, the Hang Seng rose 0.17%, the Jakarta Composite added 0.03%, the KLSE Composite was up 0.16%, the Nikkei 225 climbed 0.29%, the Straits Times was up 0.03%, the Seoul Composite advanced 0.49% and the  
Taiwan Weighted was 0.13% higher in early trade.

Back home, terming as 'very high' the 8.6% inflation, the RBI on Thursday hinted that it could take more policy actions in its review meeting next month. Referring to the government’s fiscal deficit target of 4.6% for 2011-12, RBI governor D Subbarao said it would be difficult to achieve in view of the impact of rising crude oil and fertiliser prices in the international market.

The government proposes to bring down the fiscal deficit to 4.6% of GDP in the current fiscal, from 5.1% in 2010-11.

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