Market may open higher on positive Asian stocks; NTPC FPO eyed

The market may open higher on positive Asian stocks. US stocks edged higher on Tuesday after U.S. pending home sales increased in the month of December 2010. Investors will closely watch opening of the large follow-on public offer (FPO) of state-run power generation firm NTPC today, 3 February 2010.

The government fixed the benchmark price for the proposed divestment of government stake at Rs 201 per share. NTPC kickstarts what is expected to be a large fund raising exercise by Indian firms in calendar 2010 from share sales. A section of the market is concerned that a glut in share sales will soak liquidity from the secondary market. As per reports, Indian firms may raise $30 billion from share sale in 2010, led by government stake sales and initial public offers from power and property firms. Indian companies raised about $20 billion from share sales in calendar 2009.

On the macro front, manufacturing activity in January 2010 grew at its fastest pace in almost 1-1/2 years, driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector, a survey showed on Monday. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian companies, rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in December.

Exports continued to rebound, rising an annual 9.3% in December to $14.6 billion, their second consecutive monthly rise, although the pace of annual growth was slower than the 18.2% registered in November. Imports increased by 27.2% in December from a year earlier to $24.75 billion while the trade deficit shrunk by a little over 28 percent to $76.24 billion for the April- December 2009 period.

On Friday 29 January 2010, the Reserve Bank of India (RBI) raised the cash reserve ratio for banks by a higher-than-expected 75 basis points in an effort to soak up excess liquidity, and ramped up its forecast for GDP growth in the current fiscal year through March to 7.5% from its earlier forecast of 6%. It lifted its wholesale price index inflation forecast for the end of the fiscal year in March to 8.5% from 6.5%.

The RBI will target inflation in the coming months, RBI Governer D Subbarao said on Monday. Subbarao also said it is important for the government to withdraw the stimulus and that the government and central bank would have to coordinate in withdrawing stimulus. He reiterated that the economy is back to growth and added that the challenge is to accelerate momentum.

Asian stocks advanced on Wednesday after U.S. pending home sales increased and commodity prices gained. The key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.28% to 0.59%. But China's Shanghai Composite fell 1.19%.

In US markets on Tuesday after a shaky start, the Dow logged its second straight triple-digit gain, the S&P 500 jumped back to the 1100 mark. Some encouraging earnings report, positive pending home sales data and strong auto sales from Ford led the upmove. Ford's sales rose 35% in January 2010.The Dow Jones industrial average added 111.32 points, or 1.09%, at 10,296.85. The Standard & Poor's 500 Index rose 14.13 points, or 1.30%, to 1,103.32. The Nasdaq Composite Index added 18.86 points, or 0.87%, to 2,190.06.

Closer home, Key benchmark indices declined reversing early gains on Tuesday, 2 February 2010 as investors turned cautious ahead of the opening of the large follow-on public offer (FPO) of state-run power generation firm NTPC on Wednesday, 3 February 2010. The BSE 30-share Sensex fell 192.59 points or 1.87% to 16,163.44 on that day.

As per provisional figures on NSE, foreign funds sold shares worth Rs 455.01 crore and domestic funds bought shares worth Rs 41.93 crore on Tuesday.