Indian stocks to open on a cautious note: Friday Market Preview

RIL’s AGM, slated to take place today, will outline business plans for the current fiscal

The stock market in India is likely to open on a cautious note on mixed cues from the global arena. Wall Street settled mixed on Thursday ahead of the release of the important jobs data on Friday, which will reveal the state of the country’s economic growth. Tracking the US, the Asian pack was lower in early trade on Friday. The SGX Nifty was 15 points down at 5,548 compared to its previous close of 5,563.

Domestic investors will also take cues from Reliance Industries’ AGM to see what the company’s chairman Mukesh Ambani’s plan for the current fiscal will be.

The Sensex and the Nifty opened well below Wednesday’s closing following a huge decline in US markets and weakness in all Asian markets. The Sensex opened at 183 points lower at 18,426 and the Nifty started 62 points lower at 5,530. The indices immediately hit their intra-day lows, at 18,391 and 5,522.

Very weak US data raised questions about future demand for Asian exports as well as the likely impact on economic growth. Apart from a weak ISM manufacturing reading, employment data from ADP showed an increase of just 38,000 jobs in the past month, well below expectations for an increase of 175,000.
 
But the Indian market showed good resilience and the Sensex and Nifty stabilised after the morning lows and moved up to their intra-day highs at 18,541 and 5,568 respectively. This happened on reports of slowing down of food inflation. Food inflation rose 8.06% in the year to 21 May 2011 slowing down from an annual rise of 8.55% a week ago. The primary articles price index was up 10.87% compared with an annual rise of 11.60% a week earlier. However the fuel price index climbed 12.54% compared with a rise of 12.11% a week earlier. Finally, the Sensex fell 115 points to close at 18,494, while the Nifty fell 42 points to close at 5,550.

Markets in the US closed mixed on Thursday on weak economic data and ahead of the release of the key jobs data on Friday. Factory orders fell in April due in part to weaker sales of motor vehicles, machinery and computers. This apart, initial unemployment claims fell less-than-expected.

The Dow slipped 41.59 points (0.34%) to 12,248.55. The S&P 500 shed 1.61 points (0.12%) to 1,312.94  while the Nasdaq added 4.12 points (0.15%) to close at 2,773.31.

Markets in Asia that were mixed in early trade on Friday were trading lower subsequently, awaiting the release of US jobs data, which will reveal the pace of growth in the world’s largest economy. Shares in Japan edged higher on short covering after falling sharply on Thursday while the market in Seoul was flat as exporters were concerned about the global economic growth. Meanwhile, Japanese auto sales fell by one-third in May, the lowest total for the month since 1968, as car makers struggled to restart production after the earthquake and tsunami that devastated the country in March.

The Hang Seng was down 0.47%, the Jakarta Composite declined 0.32%, the KLSE Composite fell by 0.03%, the Nikkei 225 was 0.32% lower, the Straits Times declined 0.36% and the Seoul Composite fell by 0.12%. On the other hand, the Shanghai Composite gained 0.18% and the Taiwan Weighted rose 0.19%.

Back home, the Reserve Bank of India (RBI) on Thursday expressed confidence that banks would start providing funds to microfinance institutions (MFIs) once guidelines for regulating the sector are put in place.

RBI Deputy governor KC Chakrabarty hinted that RBI guidelines on MFIs, expected shortly, would be in line with the norms announced in the monetary policy. “There will be no surprise in the final guidelines for MFIs,” he said.

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