Market may fall for the second straight day on weak Asian stocks

The market may extend losses for the second straight day tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could fall 3 points at the opening bell.



India's largest bank by branch network and net profit State Bank of India announced after market hours on Monday that its net profit rose 0.45% to Rs 2501.37 crore in Q2 September 2010 over Q2 September 2009. Hindalco Industries and Tata Motors will announce their Q2 results today.

Asian stocks dropped Tuesday as markets pulled back from a rally that has driven some of the region's benchmarks to record highs. He key benchmark indices in China, Hong Kong, Japan, South Korea and Singapore fell by between 0.04% to 1.02%. But, the key benchmark indices in Indonesia and Taiwan rose by between 0.04% to 0.16%.

Gains in global stocks and commodities were extended last week after the U.S. Federal Reserve on Wednesday announced it would sink $600 billion into buying Treasurys over the next eight months to stimulate the sluggish economy by lowering long-term interest rates.

Southeast Asian economies need to shift towards less expansionary fiscal and monetary policies as they recover from the global economic downturn, the Organisation for Economic Cooperation and Development (OECD) said in a report published on Tuesday. Southeast Asian economies are expected to achieve average growth of 6.0% per year in 2011-2015, roughly in line with the precrisis level of 6.1% due to strong domestic demand, the report said. It projected 7.3% growth in the region for 2010.The report, which is the first of its kind issued by the OECD, analyses the long-term economic outlook and the policy challenges for the Southeast Asian region.

Back home, U.S. President Barack Obama endorsed on Monday India's long-held demand for a permanent seat on the U.N. Security Council, a reflection of the Asian country's growing global weight and its challenge to rival China. In his three-day trip -- the longest stay in any foreign country by Obama -- the U.S. leader announced $10 billion in business deals, Obama will also visit Indonesia, South Korea and Japan on the tour that will see Washington push to prevent countries unilaterally devaluing currencies to protect their exports, a top theme at the G20 summit in Seoul this week. Obama has also announced the United States would relax export controls over sensitive technology, another demand of India's.

Meanwhile, the follow-on public offer of state-run Power Grid Corporation opens for bidding today, 9 November 2010. The issue closes on Thursday 11 November 2010 for the qualified institutional bidders and on Friday 12 November 2010 for all other bidders. Follow-on offer price band is fixed between Rs 85 to Rs 90 per Share, and 5% discount will be available to Retail investors and eligible employees at the issue price on allotment. Shares of Power Grid fell 3.58% on Monday, 8 November 2010.

While global liquidity remains ample, a section of the market is worried that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 80000 crore from equity and debt issue over the next three to six months. After Power Grid Corp, Steel Authority of India and Indian Oil Corp are some of the other companies that are planning large share sales in coming months.

Meanwhile, share sales by the Indian government in state run firms Manganese Ore India (MOIL) and Shipping Corporation of India are likely to hit the market by end-November, while an offer by Hindustan Copper is likely in December, Disinvestment Secretary Sumit Bose said

On the corporate front, the Q2 September 2010 corporate results have been encouraging. The combined net profit of a total of 2005 firms surged 36.8% to Rs 84187 crore on 17.9% growth in sales to Rs 618517 crore in Q2 September 2010 over Q2 September 2009.

In macro news, the food inflation eased for a third week in late October 2010, the latest government data showed. The food price index in the year to 23 October rose 12.85% compared with 13.75% rise in the previous week, as the prices of vegetables and pulses fell. Fuel inflation for the same period was at 10.67%, slowing from 11.25% the prior week. The primary articles price index was up 15.43%, compared with an annual rise of 16.62% a week earlier. Food makes up a little over 14% of the wholesale price index (WPI) while fuel contributes about 15%.

India's services sector expanded last month at a faster rate than in September 2010, bringing an end to a 3-month decline in the key business activity index, a survey showed on Wednesday, 3 November 2010. The manufacturing sector expanded in October 2010 at a much faster pace than in September 2010, supported by strong output and a sharp rise in new business, a purchasing managers' index (PMI) showed on Monday, 1 November 2010.

The Reserve Bank of India (RBI) at its second quarterly monetary policy review on Tuesday, 2 November 2010, hiked its lending and borrowing rates by a quarter point each, as expected, to tackle inflationary pressures. The central bank signaled a pause in its policy tightening drive that began in October 2009. Based purely on current growth and inflation trends, the Reserve Bank of India (RBI) believes that the likelihood of further rate actions in the immediate future is relatively low, RBI governor D Subbarao said in a monetary policy statement. "However, in an uncertain world, we need to be prepared to respond appropriately to shocks that may emanate from either the global or domestic environment," he added.

The RBI said it will continue to closely monitor both global and domestic macroeconomic conditions. "We will take action as warranted with a view to mitigating any potentially disruptive effects of lumpy and volatile capital flows and sharp movements in domestic liquidity conditions, consistent with the broad objectives of price and output stability", the policy statement said.