SHARETIPSINFO >>Stock Market Buzz >>What is expected from the market in coming days? (15 June, 2011)

Expecting RBI to raise policy rates by 25 bps:
Inflation data (WPI) for the month of May 2011 came at 9.06% as against 8.66% in April 11, higher than our expectations. Although primary articles and fuel group segments grew 11-12%, the rise in manufacturing product inflation (1% MoM; 7.27% vs 6.18 in last month) is bit negative. This is likely to put more pressure on RBI to continue with the tight policy regime. In order to tame inflationary expectations, RBI is likely to hike the rates by 25 bps. Although the current drivers of inflation are outside the purview of monetary policy, RBI is more concerned to contain pass-through of elevated prices.
RBI is likely to maintain hawkish tone in the monetary policy documents to be released on 16 June 2011.

Further reforms must ensure strong growth is long-lasting and benefits all:
As per the Survey, India's economy has been ranked among the best performers over the past decade, and poverty has been falling faster than in many other emerging economies. India now has the opportunity to move towards sustained and socially inclusive double-digit growth if the right policies are put in place.

To ensure strong growth continues and is sufficiently inclusive, the government needs to target public expenditure better on the poor. Although high growth has reduced poverty, progress could have been faster. Government spending on health is only around 1% of GDP - among the lowest rates in the world. Private health care provision is increasing but quality is highly variable. Better regulation and oversight is needed. Around 9% of GDP is spent on energy and other subsidies, most of which fails to reach the poor.
For other energy products, such as kerosene and LPG, subsidies should be transformed into cash payments targeted to the poorest people in society. The government needs to ensure that its plan to shift kerosene and fertilizer subsidies into direct cash transfers is implemented quickly. Here the roll-out of a Universal Identity Number will help ensure payments go to the right people. The report also notes that while progress has been made to improve infrastructure, even greater investment in this area is necessary to boost growth.

Best day for US stocks in June till date:
Brighter than expected economic data pulled up US stocks at Wall Street on Tuesday, 14 June 2011. They were joined by optimistic economic data coming from China earlier in the day. The dollar stayed weak for the full day further sweetening the momentum. In addition, to better than expected earning from a major electronic retailer fuelled stocks further. It was best day for US stocks till day in June till date.

For the day, that ended on Tuesday, 14 June 2011, Dow ended higher by 123.14 points (1.04%) at 12,076.11. Nasdaq ended higher by 39.03 points (1.5%) at 2,678.72. S&P 500 ended higher by 16.04 points (1.3%) at 1,287.87.
In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, fell by 0.4%. At Wall Street on Tuesday, domestic data showed that producer prices for May were up 0.2%, which is slightly more than the 0.1% increase had been widely expected. Core producer prices also increased by 0.2%, which is exactly what had been expected. Retail sales for May slipped 0.2%, but that was actually softer than the 0.7% slide that had been expected, on average. Excluding autos, retail sales actually increased by 0.3%, which is greater than the 0.2% increase that had been generally anticipated. Separate data had wholesale prices up last month by the smallest amount in 10 months.

In China, People's Bank of China announced a half-percentage-point rise to the reserve requirement ratio. The hike, China's sixth this year, is slated to take effect June 20, bringing the ratio for most large lenders to 21.5%. Earlier in the day, reports in China showed today that Japan's biggest export customer is still growing amid government measures to restrain inflation. Industrial production rose 13.3%, exceeding a median 13.1%, while investment in fixed-asset investment quickened. Chinese consumer inflation came in at 5.5% on Tuesday, accelerating from 5.3% in April, roughly meeting forecasts. Retail sales were 16.9% above the year-ago period.

Crude oil prices rose for the first time in three days on Tuesday, 14 June 2011 at Nymex. Prices rose following not-so-bad economic data that came from China and US in contrary to somewhat was expected by investors. Weak dollar also supported prices. Prices had dropped during the past couple of days on demand concerns. On Tuesday, crude oil futures for light sweet crude for July delivery closed higher by $2.07 (2.1%) at $99.37/barrel.
Precious metals rose on Tuesday, 14 June, 2011 at Comex. Prices shone as the dollar fell and investors thought that recent prices are a good buy after bullions incurred losses in the last few sessions. Gold for August delivery rose $8.8 or 0.6%, to end at $1,524.4 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. Silver prices for July delivery rose $0.67 (1.9%) to end at $35.41.

Indian ADRs ended mixed on Tuesday. HDFC Bank and ICICI Bank gained 0.8% and 0.7% respectively. Tata Motors and Wipro Technologies lost 0.14% and 0.15% respectively.
For tomorrow, quite a few economic data are expected. Consumer price index, Empire manufacturing data and industrial production are the main data expected.

Nifty June 2011 futures at premium:
Nifty June 2011 futures were at 5516.10, at a premium of 15.60 points over spot closing of 5500.50. Turnover on NSE's futures & options segment declined to Rs 72949.29 crore from Monday's (13 June 2011) Rs 82244.24 crore.
Tata Motors June 2011 futures were at 987.20, at a premium over spot closing of 981.15. Bata India June 2011 futures were at 558.50, at a premium over spot closing of 555.30. State Bank of India (SBI) June 2011 futures were at 2244, at a premium over spot closing of 2231.
In the cash market, the S&P CNX Nifty rose 17.70 points or 0.32% to settle at 5,500.50, its highest closing since 9 June 2011.

RUPEE: Down On Negative Local Shares:
Rupee opened almost flat on Wednesday, June 15, 2011 trailing weak local shares and a gaining greenback overseas. The domestic currency commenced at Rs 44.74 per dollar, same as previous closing price and remained in a narrow range. The local unit hit an intra day high of 44.68 so far during the day. In the spot currency market, the Indian rupee was last seen trading at 44.69 at 10.45 AM IST, higher by around 5 paise or 0.12% as compared to previous close at 44.74.

The key benchmark indices drifted lower in early trade on mostly lower Asian stocks and on fall in US index futures. Meanwhile, on the macro front, the latest government data showed that headline inflation rose 9.06% in May 2011, higher than 8.66% rise in April 2011, hurting investor sentiments. The government also revised upwards the inflation rate for March 2011 to 9.68% from the provisional 9.04% reported earlier. The RBI is seen raising its key lending rate by 25 basis points at its mid-quarter monetary policy review on 16 June 2011 to tame inflation.

Soya Bean Declines Further 1.40% On Bearish Cues:
Edible Oil complex plunged in the early trading session with the Soya bean futures falling very sharply on heavy long liquidation. Benchmark July soya bean tumbled by Rs 32.50 or 1.39% to the session low of Rs 2306 per 100 kg. The contract is currently trading lower at Rs 2313 and the open interest dipped by 1.34% to 110370 tonnes, indicating profit taking. Volume traded as of now stood at 40,830 tonnes.

As per market sources , the total imports of soya oil degum during the June and July month are likely at around 1.20 lakh tonnes each due to low price realization from domestic soyabean crushing . Currently, millers are reporting the negative realization from soyabean crushing, while the prices of imported soyaoil are having a cost advantage over domestic prices. This may provoke the strong imports of soyaoil degum in the coming days.

The main reason was probably selling in the corn market which also impacted the beans and wheat. USDA reported soybean planting advanced by 19 points to 87% complete. Last year progress was at 90%. The ten-year average is at 89%. Farmers made excellent progress last week. USDA issued its first soybean condition rating for 2011. The rating was a bit of a surprise as USDA found observers ranking the crop above average at 67% good to excellent.

Jeera Eases Further More Than 1% On Bearish Cues:
Jeera futures witnessed further selling pressure due to weak domestic as well as exports demand against adequate stocks position. Darth of buying participation was seen in domestic Jeera market as fresh supplies from Syria and Turkey will commence from July onwards. Jeera exports from India dropped by 35% to 49,250 tonnes during the April to March 2010-1. Heavy selling in the domestic pepper futures also added bearish cues.

Benchmark July Jeera on NCDEX slipped further by Rs 153 or 1.07% to the session low of Rs 14019 and the contract is currently trading lower at Rs 14070 per 100 kg. The open interest added 0.59% to 21582 tonnes, indicating short selling. Volume traded as of now stood at 2,235 tonnes. Technically, the July contract has next support at Rs 14,000 and resistance at Rs 14,250 per 100 kg.


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