A sell-off on cards on weak global cues

The market is likely to open on a weak note as a deteriorating global economic outlook pushed investors away from risk assets. Asian stocks fell after an overnight steep slide in US stocks on Thursday, 18 August 2011. Trading of S&P CNX Nifty on the Singapore stock exchange indicates a slump of 76 points at the opening bell. Pharma major Ranbaxy Labrotoraries may see action on reports it may consider sale of its Lipitor generic rights. Lipitor has a market size of $11 billion in the US.



Foreign institutional investors (FIIs) sold shares worth Rs 488.67 crore on Thursday, 18 August 2011, as per provisional data from the stock exchanges. FIIs have sold shares worth Rs 8,053.88 crore this month, till 18 August 2011, as per data from the stock exchanges. There was a massive outflow of Rs 5279.30 crore in just three trading sessions between 5 August 2011 and 9 August 2011.

FIIs have sold shares worth a net Rs 13093.13 in calendar year 2011 so far, as per data from the stock exchanges. Domestic institutional investors have bought shares worth a net Rs 20608.77 this year so far.

Sustained selling by foreign funds amid concerns that higher interest rates and global economic slowdown will restrict corporate profit growth sent Indian shares tumbling on Thursday, 18 August 2011. The BSE Sensex tumbled 371.61 points or 2.2% to settle at 16,469.79, its lowest closing level since 26 May 2010. From a recent high of 18,871.29 on 25 July 2011, the Sensex has tanked 2,401.50 points or 12.72% in seventeen trading sessions.

The recent steep slide in global crude oil prices will ease concerns of higher oil subsidy burden for the government provided the fall in oil price sustains. US crude-oil futures continued to slide during Asian hours on Friday, 19 August 2011, as a deteriorating global economic outlook pushed investors away from risk assets, deepening concerns about demand for commodities. New York Mercantile Exchange crude-oil futures for September delivery shed $1.42, or 1.7%, to $80.96 a barrel in electronic trading. The drop came on top of the $5.20, or 5.9%, plunge in a regular Nymex session on Thursday, 18 August 2011, when the front-month contract suffered its biggest percentage and dollar price decline since 8 August 2011.

Investors investing in India are worried that higher interest rates will restrict corporate profit growth. Commercial banks have raised lending rates over the past few days after the Reserve Bank of India (RBI) late last month raised its key lending rate by a steeper-than-expected 50 basis points at a policy review. Three top commercial banks, State Bank of India, ICICI Bank and HDFC Bank, last week, raised lending rates by half a percentage point.

Indian firms relying on European and US markets are worried about a likely economic slowdown in the US and Europe. Indo-Europe trade stands at $67 billion, making it India's largest trading partner globally. Bilateral trade between India and the US stood at $36.5 billion in 2010.

Reserve Bank of India (RBI) deputy governor Subir Gokarn on Thursday, 18 August 2011, said that the primary objective of monetary policy must be to keep inflation low and stable. The Reserve Bank of India (RBI) is scheduled to undertake a mid-quarter policy review on 16 September 2011.

Food Minister K.V. Thomas on Wednesday, 17 August 2011, said that the government plans to introduce a food security bill, which promises to give cheap food grains to 70% of the country's population, in the winter session of parliament. Thomas told reporters that the bill won't be introduced in the ongoing session of parliament, as earlier planned, because the "consultation process with state governments and different ministries is still on. "A ministerial panel had cleared the draft law last month.

Indian Meteorological Department (IMD) said on Thursday, 18 August 2011, that monsoon rains were 26% above normal in week to 17 August 2011, strengthening from a 14% above normal reading in the previous week. The June to September Southwest monsoon rains are crucial to crop production in 60% of the country that does not have adequate irrigation.

Total rainfall since the beginning of the season was 1% below normal until 17 August 2011, down from a deficit of 4% until last week. Good rains will help India achieve its target of increasing its food grains output to a record 245 million metric tonnes this crop year that started 1 July 2011. Good rains could help boost rural income and may help bring down food inflation. The rainfall has been normal in 65% of the country, while it has exceeded the normal in 23% and deficient in 12% until 17 August 2011.

The rainfall was excess to normal in oilseeds-growing western region, in the rice-growing eastern region as well as parts of the grain-bowl northern region and the north-western Rajasthan state. Plantings of key summer crops have been on the rise until 5 August, aided by favourable weather, including the main summer-sown rice crop. Rice acreage rose to 26.03 million hectares as against 24.47 million hectares during the same period last year. A news agency quoted IMD spokesman B.P. Yadav as saying on Thursday, 18 August 2011, that there could probably be a weakening of the monsoon rains again next week, especially in the northern region but showers may increase in central India and southern peninsula.

Asian stocks slumped on Friday, 19 August 2011, as a deteriorating global economic outlook pushed investors away from risk assets. The key benchmark indices in China, South Korea, Indonesia, Hong Kong, Singapore, Japan and Taiwan fell by between 1.52% to 4.46%.

US stocks tumbled amid growing fears of a global recession, as investors confronted a grim mix of economic data and fresh concerns about Europe's banks. The Dow Jones Industrial Average lost 419.63 points, or 3.68%, to 10,990.58. The Standard & Poor's 500-stock index dropped 53.24 points, or 4.46%, to 1140.65, while the Nasdaq Composite lost 131.05 points, or 5.22%, to 2380.43.

On the economic front, new jobless claims rose by 9,000 to 408,000 last week, the latest sign of a persistently weak US labor market. Consumer inflation resumed its climb in July, as gasoline prices rebounded and food costs continued to rise. Consumer prices rose 0.5% from June, the largest monthly increase since March. On an annualized basis, consumer prices were up by 3.6% in July, above the Federal Reserve's target.