The Indian market may open higher on Thursday, mirroring the strong global cues. Stock-specific buying by foreign funds and short covering may also help a market recovery, but volatility may persist due to intermittent profit taking and selling by domestic funds.
On Wednesday, foreign institutional investors bought shares worth Rs.530 crore on a net basis, but domestic institutions sold shares worth Rs.28 crore, according to provisional data on stock exchanges.
According to media reports, government stress tests of the nation's leading financial firms in the United States have determined that JP Morgan, Goldman Sachs, American Express and Bank of New York Mellon will not need additional capital. At the same time, reports have suggested that Bank of America, Citigroup and Wells Fargo will be asked to raise additional capital.
While the official results are not due to be released until after the close of trading on Thursday, the leaks generated some optimism in the markets across the Asia-Pacific region this morning. Currently, Australia's All Ordinaries index is up 1.72%, Hong Kong's Hang Seng index is rising 1.12%, Japan's Nikkei 225 index is gaining 3.96% and South Korea's KOSPI is up 0.55%, but China's Shanghai Composite index is losing 0.86%.
Overnight, the U.S. markets had a pretty good session despite some profit taking during the course of the day. Market sentiment was fairly upbeat thanks to better-than-expected economic data. Investors also reacted positively to reports suggesting that several of the financial companies examined by the government don't need additional capital. The Dow Jones Industrial Average rose 1.21% and the S&P 500 index gained 1.74%, but the Nasdaq egged up a modest 0.28%, underperforming the Dow and the S&P 500 by a wide margin.
Private sector employment showed a much smaller-than-expected decrease in April, according to the latest ADP employment report. The report showed that non-farm private employment fell by 491,000 jobs in April following a revised decrease of 708,000 jobs in March. Economists had expected a decrease of 645,000 jobs compared to the loss of 742,000 jobs originally reported for the previous month. While the data points to continued weakness in the labor market, it presents another sign that the economy is stabilizing and generated some optimism about the Labor Department's monthly employment report due to be released on Friday.
Meanwhile, the Indian ADRs closed mixed. Sterlite Industries rallied 5.1%, Satyam Computers soared 9.55% and MTNL rose 2.5%, but ICICI Bank tumbled 5.79%, Infosys fell 3.05% and Wipro shed 2.75%.
Crude oil price advanced 4.6% to settle at a five-month closing high of $56.34 per barrel in New York trading on Wednesday. In Asian trading, crude oil is now trading at $56.64 a barrel, up 0.53%.
The rupee weakened to Rs. 49.58/60 against the dollar, down 0.6% on Wednesday, weighed down by a stronger dollar overseas and a pronounced fall in the stock market.
The Indian market finished Wednesday's session sharply lower, as investors took profits across the board ahead of the announcement of bank street results in the United States on Thursday evening. Cautious undertone after the recent rally and mixed global cues also weighed on the market. After moving choppily in a range of 12,272-11,899, the BSE Sensex closed at 11,953, down 178 points or 1.47% over the previous close and the S&P CNX Nifty fell 37 points or 1.01% to 3,625. While stocks across the sectors ended in the red, realty, banking and metal stocks, which appreciated sharply in the recent rally, bore the brunt of the selling pressure.
Stocks to Watch
Banking stocks may rise sharply in line with their peers in the other global markets.
SKF India could see some activity after foreign fund house Acacia Capital Partners through its various investment arms bought an additional 1.46% stake in the company though market transactions.
HBL Power Systems may move after Reliance Capital bought 17,41,000 equity shares of the company at Rs.174.13 each through the bulk deals route on the Bombay Stock Exchange. The stock closed up 20% on Wednesday.
Tata Motors could be in the spotlight after Tata sons sold around 1% of its stake in TCS in a block deal at Rs.615 a share. According to reports, the money raised will be offered as a loan to Tata Motors to help it refinance a $2-billion bridge loan.
IT stocks are likely to remain subdued on concerns about proposed expenditure tax on outsourcing in the United States.
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