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Indian stocks to see gap-down opening: Monday Market Preview

Headline inflation numbers and the RBI’s policy review will be closely watched by investors

The local market is likely to open with a gap-down opening on concerns about the possibility of the Reserve Bank of India hiking interest rates by 25 basis points in its policy review later this week and the slowdown across the world. Markets in Asia were down in early trade on Monday on dismal economic news across the region and Wall Street tumbled nearly 1.5% on Friday as slowdown in the country’s hurt investor sentiment. The SGX Nifty was at 5,460, down 25.50 points from its previous close of 5,485.50.

Dismal economic news from the domestic arena and disturbing signals globally resulted in the market closing with a 1% cut last week. Investors will be focused on the Reserve Bank of India's mid-quarter policy review on Thursday, as it weighs another possible rate hike to combat stubborn inflation and the pace of economic growth slows.

The market closed with modest gains on the first two trading days. However, adverse comments by US Federal Reserve chief Ben Bernanke dragged the market sharply lower on Wednesday. The indices settled flat on Thursday, but a steep decline in industrial output for April forced a deep cut on Friday.

Overall, the Sensex lost 108 points to close the week at 18,269 and the Nifty settled 31 points down at 5,486. The market has closed negative for three of the past four weeks. It is witnessing a downtrend with the first support on the Nifty at 5,415. If it breaches this level, the market may fall to around 5,350.

The weakening trend from the US markets on Friday and not-so-good economic news from countries across Asia led to a lower opening for markets across the region. Japan’s machinery orders fell for the first time in four months in April. Factory orders declined 3.3% in April from a 1% rise in March. Analysts had projected an increase of 1.7%. Realty shares in Hong Kong traded lower after the Kong Monetary Authority on 10th June said buyers of homes costing more than HK$6 million ($770,000) will have to increase up-front payments.

The Shanghai Composite sank 1.22%, the Hang Seng declined 0.82%, the Jakarta Composite fell 0.36%, the KLSE Composite was down 0.40%, the Nikkei 225 retraced 0.77%, the Straits Times contracted 0.47% and the Taiwan Weighted was down 0.39%. Bucking the trend, the Seoul Composite was trading 0.40% higher in early trade.

The US markets ended with deep cuts on Friday as the Federal Reserve has failed to outline a new stimulus plan after the $600 billion bond-buying QE2 comes to an end this month. Though there was no particular reason for the decline, fears of the slowing pace of the global recovery weighed on investors. Financials made a late-session comeback after news that extra capital charge on the biggest banks is likely to be at 2% to 2.5%, instead of the widely-reported 3%.

The Dow tumbled 172.45 points (1.42%) to end at 11,951.91—below the 12,000-mark, the first time since 18 March 2011. The fall also marked the Dow’s longest stretch of decline since 2002. The S&P 500 declined 18.02 points (1.40%) to 1,270.98, its lowest level since 16th March.  The Nasdaq skidded 41.14 points (1.53%) to close at 2,643.73, wiping out its yearly gains.

Back home, Maruti Suzuki India on Sunday said it is willing to recognise the new union—the main demand of the workers. The workers also said they are willing to end the stir provided 11 of their sacked colleagues are reinstated. The development is seen as the first signs of a resolution to the over week-long strike at its Manesar plant.

The company, however, was silent on the demand for reinstating the sacked workers, although sources said it was unlikely that they would be taken back.

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Uptrend losing steam: Weekly Market Report

First new support for the Nifty is at 5,415 and then at 5,350

Dismal economic news from the domestic arena and disturbing signals globally resulted in the market closing with a 1% cut this week. The eyes of investors will be focused on the Reserve Bank of India's mid-quarter policy review on Thursday, as it weighs another possible rate hike to combat stubborn inflation and the pace of economic growth slows.

The market closed with modest gains on the first two trading days. However, adverse comments by US Federal Reserve chief Ben Bernanke dragged the market sharply lower on Wednesday. The indices settled flat on Thursday, but a steep decline in industrial output for April forced a deep cut on Friday.

Overall, the Sensex lost 108 points to close the week at 18,269 and the Nifty settled 31 points down at 5,486. The market has closed negative for three of the past four weeks. It is witnessing a downtrend with the first support on the Nifty at 5,415. If it breaches this level, the market may fall to around 5,350.

BSE Consumer Durables (up 3%) and BSE IT (up 1%) were the top gainers in the sectoral space. BSE Auto (down 2%), BSE Bankex and BSE Metal (down 1%) were the major losers.

TCS (up 3%), Cipla, Infosys Technologies (up 2% each), NTPC and Reliance Industries (up 1% each) were the top performers on the Sensex. Hero Honda (down 7%), ONGC (down 5%), Jaiprakash Associates (down 4%), Bajaj Auto and State Bank of India (down 3% each) were the leading losers on the index.

Food inflation jumped to a two-month high of 9.01% for the week ended 28th May from 8.06% in the previous week. The latest numbers are the highest level of food inflation since the week ended 26th March when it was 9.18%.

The Index of Industrial Production (IIP) registered a growth of 6.3% in April as per the new series with a base year of 2004-05, it was announced on Friday. According to the old series, which will continue for three months, factory output nosedived to just 4.4%. The finance minister described the decline as 'disturbing' and preferred to wait for other data to ascertain the trend.

On the positive side, the monsoon is expected to cover the remaining parts of the north-east over the next two days and advance over remaining parts of the peninsula and east India, besides some parts of central India in the later half of the next week, the India Meteorological Department said.

The country's exports registered a record 57% growth to $26 billion in May, on the back of a splendid performance by engineering, oil and electronics sectors. Imports also jumped by 54% to a four-year high of $41 billion, mainly due to higher oil prices and a surge in gold imports. The trade deficit-the gap between imports and exports- in May, widened to $15 billion (a 67% increase), the largest since August 2008, prompting the authorities to caution that the trade deficit for the current fiscal could touch a record $145billion-$150 billion.

In international news, US Federal Reserve chief Ben Bernanke acknowledged a slowdown in the US economy, but he did not outline any plan to spur growth. The $600 billion bond-buying programme that the Fed launched last year to aid financial markets is set to end this month, and there are no signs of any new stimulus package.

South Korea's central bank on Friday raised its policy rate by a quarter percentage point after holding it steady for the past two months. The Bank of Korea's monetary policy committee raised the 7-day repurchase agreement rate to 3.25% despite signs of a slowing economy.

Chinese exports rose 19.4% in May from a year earlier, slowing from the 29.9% pace in April, while import growth increased to 28.4% from 21.8%. The trade surplus of $13.1 billion in May, up from $11.4 billion in April, was still less than expected.

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