Expiry of May 2010 derivatives contracts may keep market volatile

Volatility may rise as traders rollover positions in the derivatives segment from May 2010 series to June 2010 series ahead of the expiry of the near-month May 2010 contracts today, 27 May 2010. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could rise 11 points at the opening bell. The government will unveil data on some wholesale price indices for the year through 15 May 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

Meanwhile, stocks brokers have advised clients not to sell shares today which they had bought in the cash segment on Wednesday, 26 May 2010, due to clubbing of settlements due to a bank holiday today, 27 May 2010. There is no settlement of trades today due to the bank holiday.

Meanwhile, the Reserve Bank of India (RBI) on Wednesday eased rules to boost liquidity at banks to avoid a cash crunch because of payments for tax and license fees for third-generation mobile-phone spectrum. As per RBI's circular released on 26 May 2010, banks can borrow as much as 0.5% of their deposits from the central bank under the repurchase agreement till 2 July 2010.

In addition, RBI said that as an ad hoc measure, banks can seek a waiver for any shortfall in maintenance of the prescribed 25% statutory liquidity ratio (SLR) while availing the temporary facility. Besides, the central bank has decided to conduct two rounds of liquidity adjustment facility (LAF) operations till 2 July 2010. Through LAFs, that are conducted at least once a day, banks can avail of funds through the repo window or park surplus cash through the reverse repo route.

Asian stocks declined on Thursday on rising concern that Chinese property curbs and Europe's debt crisis will hurt global economic growth. The key benchmark indices in Hong Kong, Japan, China, Indonesia, Singapore and Taiwan were down by between 0.36% to 1.72%. However South Korea's Seoul Composite index rose 0.07%.

US markets declined in volatile trading session on Wednesday on selling pressure in financial and technology stocks. The Dow Jones Industrial Average slipped 69.30 points, or 0.69%, at 9,974.45. The S&P 500 was down 6.08 points, or 0.57%, to 1067.95. The Nasdaq was down 15.07 points, or 0.68%, at 2195.88.

Close home, Tata Steel reported a consolidated loss of Rs 2,009.22 crore in the year ended March 2010 compared with a net profit of Rs 4950.09 crore in the year ended March 2009. Total income decreased 29.82% to Rs 103578.97 crore in the year ended March 2010 over the year ended March 2009.

BPCL, Cairn India, Gujarat State Petronet, Omaxe and Tata Motors, will announce their January-March 2010 quarter results today.

Prime Minister Manmohan Singh on Monday said inflation is showing signs of moderating and the government expects to achieve a medium term target of 10% GDP growth annually. The Prime Minister said he expects inflation to moderate to 5-6% by December 2010. Singh expects 8.5% GDP growth in the year ending March 2011 (FY 2011).

The RBI expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

China, India, Brazil and Russia are powering ahead, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday, 26 May 2010, revising upwards its growth outlook for all four largest emerging economies. The OECD revised India's GDP growth forecast for 2010 to 8.2% from its earlier estimate of 7.3%. It also raised the growth forecast for 2011 to 8.5% from its earlier estimate of 7.6%. The OECD also said that underlying inflationary pressures are likely to persist given the strong outlook for demand.

In its World Economic Outlook in April 2010, the International Monetary Fund (IMF) pegged India's GDP growth forecast at 8.75% in calendar 2010 and 8.5% in calendar 2011. IMF's optimism was based on expectations of strengthening of domestic demand as the labour market improves. Expectations of increase in investment on the back of strong corporate profitability, rising business confidence and favourable financing conditions, were other factors cited by IMF for its prediction of strong growth in India's economy.

India's monsoon rains are on track to hit the country's southern coast on 30 May 2010, and the Laila cyclone in the Bay of Bengal would not derail the vital June-September rainfall, a weather office spokesman told a news agency last week. The India Meteorological Department (IMD) in late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season also holds key.

The fourth quarter corporate results have been decent. The combined net profit of a total of 2,523 companies rose 17.10% to Rs 68147 crore on 23.90% rise in sales to Rs 670843 crore in the quarter ended March 2010 over the quarter ended March 2009.

The key benchmark indices rebounded on Wednesday, 26 May 2010, tracking recovery in world stocks triggered by bargain hunting after a recent sharp slide. The BSE 30-share Sensex rose 365.36 points or 2.28% to 16,387.84 and the S&P CNX Nifty gained 110.65 points or 2.3% to 4,917.40

As per the provisional data from the stock exchanges, foreign institutional investors (FIIs) offloaded stocks worth a net Rs 166.66 crore and domestic funds bought shares worth a net Rs 64.86 crore on Wednesday, 26 May 2010.