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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.


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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