Stocks
Thursday’s Market Preview: Flat-to-positive opening likely

The Indian market is likely to see a flat-to-positive opening today. Market participants will track the weekly food inflation numbers and quarterly earnings data for direction as the day progresses. HDFC Bank, JSW Steel, Tata Chemicals, Thermax and UTV Software are among the companies that will announce their numbers today. The domestic market was closes yesterday on account of Republic Day.

On the global front, the US markets closed in the green on Wednesday on the back of positive earnings data, ignoring the Federal Reserve’s statement to continue supporting the economy. Markets in Asia were mostly higher in early trade on Thursday, but worries about rising inflation in many countries across the region capped gains. The SGX Nifty was up 19 points at 5,700.50 from its previous close of 5,681.50.

The US markets closed in the green as quarterly earnings reports overshadowed the Fed’s assertion of continuing its support to the economy. The gains were supported by material and energy sectors. Airline stocks—US Airways Group and United Continental Holdings rose on good earnings. On the other hand, Yahoo declined as its quarterly revenue forecast was disappointing. 

The Federal Open Market Committee, after its two-day meeting yesterday, said that the expansion is “continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions.”

Meanwhile, sales of new houses rose 18% to a 329,000 annual pace, according to figures from the Commerce Department. The percentage gain was the biggest since 1992, and was led by a record 72% jump in the West.

The Dow gained 8.25 points (0.07%) at 11,985.44. The benchmark rose above the 12,000 level intraday for the first time since June 2008 before it pared those gains. The S&P 500 rose 5.45 points (0.42%) at 1,296.63 and the Nasdaq advanced 20.25 points (0.74%) at 2,739.50.

Markets in Asia were mostly higher in early trade today despite positive signals from the US. Japanese stocks gained on good earnings reports from US tech and material companies while the Chinese market was fluctuated on concerns about the pace of the recovery and the government’s tight economic policy.

The Shanghai Composite was up 0.28%, the Jakarta Composite gained 0.41%, the KLSE Composite rose 0.45%, the Nikkei 225 advanced 0.25%, the Seoul Composite added 0.11% and the Taiwan Weighted gained 0.56%. On the other hand, the Hang Seng was down 0.14% and he Straits Times fell 0.17% in early trade.

Ahead of the Union budget for 2011-12, the Reserve Bank of India, in its third quarter monetary policy review, had warned that delay in hiking the prices of petroleum products and fertilisers will adversely impact the government's ability to reduce fiscal deficit.

The government started fiscal consolidation in the last budget, when it proposed to reduce fiscal deficit from 6.8% of GDP to 5.5% in the current fiscal. The RBI said if the government does not make up for the rising global oil prices, inflationary expectations will rise and managing it would become difficult.
 

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Global Market View

While the Indian bourses are closed today on account of Republic Day, here is a brief view of the global markets. Wall Street closed almost unchanged overnight, recovering from early losses as president Barack Obama proposed a five-year freeze on some government spending and called for job creation. Markets in Asia were mixed in morning trade as corporate earnings reports from the US were disappointed investors.

The domestic market opened with modest gains on Tuesday on support from its Asian peers. Trading was volatile as investors were cautious ahead of the Reserve Bank of India’s (RBI) monetary policy and this capped gains in the early session. However, with key interest rates raised less than what analysts expected, the indices touched their intra-day highs soon after the central bank made its announcement. Investors took the opportunity to book profits, resulting in the indices paring all their gains and venturing into negative territory.

The market, which showed promise of a positive closing, saw a reversal in the last hour. Banking, fast-moving consumer goods and realty were hit the hardest as fears crept in about the possibility of further rate hikes in the next couple of months. The Sensex fell 182 points to close at 18,969, while Nifty lost 56 points to close at 5,687. A fresh bout of selling has started and we may see the market head lower, even though the fall may not be significant.

The US markets ended steady on Tuesday as poor quarterly earnings from companies like 3M, Johnson & Johnson and Bank of America pulled down the indices early in the day. The indices recouped their losses following the president’s State of the Union address, in which he proposed a five-year freeze on discretionary spending and called upon industry leaders to create more jobs. In economic news, US consumer confidence rose in January to its highest level in eight months, but single-family home prices fell for a fifth straight month in November.

The Dow shed 3.33 points (0.03%) at 11,977.19. The S&P 500 added 0.34 point (0.03%) at 1,291.18 and the Nasdaq was up 1.70 points (0.06%) at 2,719.25.

Concerns over disappointing quarterly numbers from US companies cast a spell on the Markets in Asia, which were mixed in morning trade. The Seoul market was boosted by news of good gross domestic product growth. GDP in the fourth quarter of 2010 was up a seasonally adjusted 0.5% from the quarter before.

The Shanghai Composite was up 0.53%, the Straits Times gained 0.18%, the Seoul Composite advanced 0.60% and the Taiwan Weighted rose 0.46%. On the other hand, the Hang Seng declined 0.41%, the Jakarta Composite was down 0.24%, the KLSE Composite fell 0.61%, and the Nikkei 225 was down 0.48%.

Back home, India Inc has expressed fears that the Reserve Bank of India (RBI) increasing key policy rates would adversely impact industrial growth, which had slipped to 2.7% in November.

The central bank has hiked its short-term lending and borrowing rates by 25 basis points (0.25%) each with immediate effect to tackle high inflation, signalling further upward movement in the interest rates. The RBI in 2010 raised the key policy rates six times to contain inflation, which shot up to 8.43% in December on high prices of food items, from 7.48% in November.
 

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Tuesday Market Report: Weakness to persist

Market may head lower but not very sharply

The market opened with modest gains this morning on support from its Asian peers. Trading was volatile as investors were cautious ahead of the Reserve Bank of India’s (RBI) monetary policy and this capped gains in the early session. However, with key interest rates raised less than what analysts expected, the indices touched their intra-day highs soon after the central bank made its announcement. Investors took the opportunity to book profits, resulting in the indices paring all their gains and venturing into negative territory.

The market, which showed promise of a positive closing, saw a reversal in the last hour. Banking, fast-moving consumer goods and realty were hit the hardest as fears crept in about the possibility of further rate hikes in the next couple of months.

The Sensex opened 76 points higher than yesterday’s close at 19,227, while the Nifty opened 20 points up at 5,763. The market was strong in the morning session and after the monetary policy review was announced, the markets climbed to a seven-day intra-day high, which trapped the bulls. Selling took over and the Sensex fell 182 points to close at 18,969, while Nifty lost 56 points to close at 5,687. A fresh bout of selling has started and we may see the market head lower, even though the fall may not be significant. The advance decline of NSE stocks was 505:883.

The market breadth turned negative as the key benchmarks witnessed a reversal at the end of the day. The Sensex had 19 losers against 11 gainers, while the Nifty closed with 34 stocks in the red and 16 in the green. Among the broader markets, the BSE Mid-cap index declined 0.41% and the BSE Small-cap index fell 0.35%.

The sectoral gainers were BSE Consumer Durables (up 1.73%), BSE Capital Goods and BSE Power (up 0.28% each). All others ended in the red with BSE Bankex (down 2.34%), BSE Fast Moving Consumer Goods (down 1.67%) and BSE Healthcare (down 1.25%) ending as the top losers.

NTPC (up 1.85%), Hero Honda (up 1.62%) and Hindalco Industries (up 1.31%) were the major gainers on the Sensex. Hindustan Unilever (down 5.45%), ICICI Bank (down 4.21%) and HDFC Bank (down 2.85%) were the top losers.

Home, auto and loans to corporates may become dearer as the RBI today hiked short-term lending and borrowing rates by 0.25% each, though bankers felt there may not be an immediate increase in interest rates.

The rate measures are aimed at checking the price rise while retaining the growth momentum, the RBI said. It has raised the year-end inflation projection to 7%, but retained the economic growth forecast for the fiscal at 8.5%.

The short-term lending (repo) rate has been increased to 6.5%, while the borrowing (reverse repo) rate has gone up to 5.5%. The RBI has also extended the additional liquidity support facility to banks till 8 April 2011. It has retained the cash reserve ratio (CRR)—a portion of deposits that banks are required to maintain in cash with the RBI—at 6% to ensure that the system has enough liquidity to meet loan requirements.

Markets in Asia ended mixed on Tuesday. Some regional bourses got a lift from the positive sentiment from US markets overnight. China’s benchmark—Shanghai Composite—was down as commodities like crude and gold declined.

Meanwhile, the Bank of Japan raised its growth forecasts for the year through March. Officials also voted unanimously to keep the key interest rate between zero and 0.1% and a programme to buy securities at 5 trillion yen ($60 billion).

The Shanghai Composite was down 0.68%, the Hang Seng shed 0.05%, the KLSE Composite tanked 1.07%, the Straits Times fell by 0.14% and the Taiwan Weighted was down 0.23%. On the other hand, the Jakarta Composite surged 2.63%, the Nikkei 225 gained 1.15%, and the Seoul Composite added 0.22% at the end of the day.

Back home, foreign institutional investors were net buyers of stocks worth Rs63.95 crore on Monday. Domestic institutional investors bettered this figure; they were net buyers of Rs236.51 crore.

Healthcare chain Apollo Hospitals Enterprise (3.38%) has received shareholders’ approval to raise about Rs1,054.80 crore through issue of securities. The proceeds would be utilised for expansion plans as well as to meet additional working capital requirements and general corporate purposes, the firm said in a regulatory filing to the Bombay Stock Exchange (BSE).

Pharma major Aurobindo Pharma (down 0.45%) has received approval from the US health regulator to manufacture and market generic levofloxacin tablets, used for treating bacterial infections, in the American market. The approval is for the manufacture and marketing of levofloxacin tablets in the strengths of 250 mg, 500 mg and 750 mg, Aurobindo said in a statement.

GVK Power and Infrastructure (GVK-PIL) (down 0.58%) on Tuesday said it has signed pacts with Indonesian government for setting up two new international airports in North Bali and Yogyakarta.

The memorandum of understanding (MoU) for the Bali airport is a three-way agreement between Badan Koordinasi Penanaman Modal, PT Pembangunan Bali Mandiri and GVK-PIL, while the MoU for Java airport is an agreement between Angkasa Pura 1, Indonesian government-owned airport operations and GVK-PIL.

The Indian market will be closed on Wednesday on account of Republic Day.

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