Market may edge higher on firm Asian stocks

The market may edge higher in early trade on higher Asian stocks. However some profit taking at higher levels cannot be ruled out after a recent sharp surge in share prices that took the key benchmark indices to their highest level in more than a month in intraday trade on Wednesday, 2 December 2009. The government will today unveil data on some wholesale price indices for the year through 21 November 2009 viz. the food price index, the primary articles index and the fuel price index.

The government may reportedly give more powers to the disinvestment department, allowing it to override the administrative ministries in disinvestment-related decision, as it seeks to fast-track the disinvestment process. The government is aiming to raise up to Rs 14,000 crore via sale of its stake in NTPC, hydel firm Satluj Vidyut Nigam and Rural Electrification Corporation and public offerings will be made by these firms from January to March 2010.

In a move that is aimed at signalling the UPA government's intent to aggressively push the reform agenda, the Cabinet will on Thursday 3 December 2009 clear the Pension Fund Regulatory & Development Authority Bill that seeks to bring foreign direct investment (FDI) into the sector. The Bill proposes to allow foreign players to hold up to 26% stake in Indian pension fund companies. It would also permit pension funds to deploy part of their corpus abroad in approved instruments.

The bank credit for the fortnight ended 20 November 2009 increased by Rs 7,056.63 crore to Rs 28,98,769.90, according to the latest statement of position of commercial banks from the Reserve Bank of India. This is the second fortnight in a row that bank credit has increased. In the preceding fortnight, bank credit increased by Rs 23,147.6 crore. Bankers said that credit growth is likely to pick up following the better than expected second quarter GDP growth numbers.

The World Bank has committed to increase its lending to India to about $7 billion this year from an average $2.3 billion in the previous four years, the finance ministry said in a statement. In September 2009, the World Bank approved $4.3 billion in loans for India to help finance infrastructure building and to shore up the capital of some state-run banks as the economy recovers from the global financial crisis. The loans are part of the bank's $14 billion lending for Asia's third-largest economy over three years through 2012.

The economy could grow 7% this fiscal year, with industrial output and services offsetting an expected decline in farm output, but it will be inflation that determines the Reserve Bank's monetary policy, C Rangarajan a top economic advisor said on Tuesday.

On Monday, India reported economic growth of 7.9% in the quarter through September, its fastest rate in 18 months, beating expectations and adding pressure on the central bank and government to bring forward a rate rise and roll back fiscal stimulus amid mounting inflation.

Rangarajan, a former RBI governor, also reiterated the government stance that fiscal stimulus would remain in place through the end of the fiscal year in March. The central bank holds its next policy meeting in late January 2010.

Indian exports, meanwhile, fell for the 13th straight month in October on an annual basis, but the rate of decline narrowed to 6.6% and economists expect a return to growth in coming months thanks to last year's low base effect and an improving global economy.

Manufacturing activity in India expanded for the eighth consecutive month in November 2009 but at its weakest pace since March on a slowdown in growth of output, new business and employment, a survey released on Tuesday found.

Rangarajan, who adjusted his fiscal year GDP growth outlook to 7% from 6.5% said he hoped growth in services and manufacturing would offset any decline in the farm sector.

India's main wholesale price index inflation was a moderate 1.34% in October from a year earlier, but is expected by economists to raise to as much as 8% by the end of the fiscal year in March 2010, fuelled by high food prices which tend to be beyond the scope of monetary policy. In October, the RBI withdrew emergency liquidity measures and increased some loan provisioning requirements, but left its key policy rates unchanged.

Most of Asian stocks rose on Thursday as a weaker yen boosted Japanese makers of cars and electronics and the Federal Reserve said the US economy improved. The key benchmark indices in Hong Kong, Japan, South Korea and Taiwan rose by between 0.01% to 2.28%. But the key benchmark indices in China and Singapore fell by between 0.03% to 0.36%.

US markets ended mixed on Wednesday, 2 December 2009 with the Dow finishing slightly lower, as oil prices fell and investors worried about bank profits. The Dow was down 18.90 points, or 0.2%, to 10,452.68. The S&P 500 was up 0.38 points, or 0.1%, to 1,109.24, and the Nasdaq Composite Index rose 9.22 points, or 0.4%, to 2,185.03.

In economic data, reports showed an improvement in the jobs picture. The ADP reported that private employers shed 1,69,000 jobs from their payrolls in November 2009. This was less than jobs lost in October 2009 but more than expected.

The Fed's beige-book report was the most upbeat in about two years. The report showed consumer spending up moderately, and an improvement in both home sales and construction. However, commercial real estate activity was noted as deteriorating and labor conditions remain weak.

Back home, key benchmark indices saw divergent trend in what was a volatile trading session on Wednesday, 2 December 2009. The market retraced from a one-month high as profit booking emerged. The BSE 30-share Sensex fell 28.36 points or 0.16% to 17,169.91. While, the S&P CNX Nifty was up 1.25 points or 0.02% to 5123.25 on that day.

As per provisional data, foreign funds on 2 December 2009, bought equities worth a net Rs 885.65 crore. Domestic funds offloaded stocks worth a net Rs 213.64 crore.