Nifty Outlook for the Week

The Nifty is likely to consolidate between the range of 4900 to 5200 levels in coming trading session.Market is waiting for trendline breakout.On the higher side it may face resistance around 5200.Once it breaks upperside trendline next target 5400.On the downside 4800-4700levels is an immediate support

FM expects inflation to moderate

India’s annual inflation rate, which neared 8 percent in early May, is expected to moderate once the impact of lower steel and cement prices is felt, Finance Minister Palaniappan Chidambaram said on Friday.

The wholesale price inflation rate, India’s most widely watched measure, rose 7.83 percent in the 12 months to May 3, its highest since Nov. 2004 and above a median forecast of 7.50 percent in a Reuters poll.

"Our expectation is that inflation will moderate. We are waiting for steel and cement price cuts to come into force. You have to be patient," the finance minister told reporters.

"We reserve the right to take more administrative measures," he said without elaborating.

Chidambaram also said unless global crude oil prices decline, India would continue to witness "pretty high inflation" in the fuel group.

HSBC to Buy 73.2% of Indian Broker IL&FS Investsmart

HSBC Holdings Plc plans to buy 73.2 percent of IL&FS Investsmart Ltd., an Indian brokerage, for 10.03 billion rupees ($235 million) to tap rising incomes in the world’s fastest growing major economy after China.

Europe’s largest bank by market value will acquire 43.85 percent from a Mauritius-based unit of E*Trade Financial Corp. and the rest from the Indian brokerage’s founder, Infrastructure Leasing and Financial Services Ltd., for 200 rupees a share, HSBC said in a statement e-mailed from Hong Hong.

Economic growth that has averaged 8.7 percent since 2003 is boosting incomes of individuals and companies in India, fueling investment in shares, bonds and mutual funds. Asia’s third- biggest economy has more than 20 million retail investors and the country’s two main stock exchanges are the world’s third and fifth-largest by transaction volume, said Sandy Flockhart, HSBC’s chief executive officer for Asia Pacific.

`` This investment is of strategic importance to HSBC as it gives us a foothold in one of the largest retail broking markets in the world,’’ Flockhart said in the statement.

HSBC will also make an offer to buy an additional 20 percent from other shareholders.

The National Stock Exchange has terminals spread across 1,486 locations in India. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has climbed sixfold in the five years through 2007, according to data compiled by Bloomberg.

Source : Bloomberg

Rupee falls to fresh 13-month low

The rupee fell to a fresh 13-month low on Friday as record high oil prices and worries about muted capital flows into a slowing Economy increased demand for US dollars.

At 1:42 p.m., the partially convertible rupee was at 42.83 per dollar, a level it last traded on April 12, 2007, according to Reuters data. It had closed at 42.75/76 on Thursday.

Sensex gains in volatile session

The stock markets displayed volatile movements on Friday. The Sensex moved up in the opening session, surrendered gains later only to bounce back again in late deals.

The Sensex moved in a range of 17,497.36 and 17,315.52 before closing at 17,434.94, showing a net gain of 81.40 points from previous close of 17,353.54. At the day’s high, it was up by 143.82 points.

The 50-issue Nifty of the National Stock Exchange inched up 42.45 points to 5,157.70 from last close.

Capital goods segment continued to attract good buying support on a healthy infrastructure growth number announced yesterday. Banking stocks also gave support to the market. Asian markets exhibited positive trend this morning following smart rally on Wal l Street yesterday.

FIIs were net buyers to the tune of Rs 706.88 crore as per provisional figures and also picked up shares worth Rs 524.05 crore in derivatives on the same day. But concern over the inflation data to be released at noon today forced operators and retail i nvestors to book profits at higher levels. - PTI

India's Rupee Declines a Fourth Week on Current Account Concern

India’s rupee declined for a fourth week on concern near-record oil prices will boost the nation’s import bill, widening its trade and current-account deficits.

The currency declined as much as 0.5 percent today to a 13- month low as demand for dollars needed to pay for crude oil increased after the commodity climbed to an all-time high of $126.98 per barrel this week. The rupee pared losses on speculation the government will ease curbs on overseas borrowings by companies, allowing more capital inflows.

``The rupee’s decline reflects concern high oil prices will increase the external deficits,’’ said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in the southern Indian city of Kochi.

The rupee weakened 2.2 percent to 42.5075 a dollar this week in Mumbai, adding to last week’s 2.3 percent slide, the worst in a decade, according to data compiled by Bloomberg. It earlier dropped to 42.915, the lowest intraday level since April 12, 2007.

The currency’s 7.6 percent decline this year is the third- worst performance among the 10 most-traded Asian currencies after the South Korean won and the Thai baht.

Funds based abroad sold $2.2 billion more of Indian stocks and bonds than they bought this year, after purchasing a net $19.5 billion in 2007, according to data from the Securities and Exchange Board of India.

Crude Oil

The rupee fell 8.1 percent in the past six months as crude oil advanced 33 percent, boosting the value of India’s oil imports to a record $8.6 billion in March, government data show. Asia’s third-largest economy depends on shipments from abroad to meet three-quarters of its energy needs.

The South Asian nation’s trade deficit widened to an all- time high of $25.4 billion in the three months through December, according to the central bank. The current-account shortfall, a measure of trade and investment flows, increased to $5.4 billion in the same quarter from $4.7 billion.

The rupee rose today, cutting the week’s losses, on speculation the government will relax limits on foreign-currency borrowings by companies.

The Economic Times newspaper reported today that India will make it easier for domestic companies to borrow cheaper funds abroad after industrial production expanded at the slowest pace in six years in March. India imposed limits on such borrowings last year to slow capital inflows that helped the rupee reach an almost a decade high, threatening to erode export earnings.

Borrowing Curbs

``The rupee should halt its decline around current levels as the market waits for government measures that may boost capital flows,’’ said Mohan Shenoi, treasurer at Kotak Mahindra Bank Ltd. in Mumbai. ``It is expected that the government is going to review restrictions on external commercial borrowings.’’

India can ease restrictions on overseas borrowings among other measures to ensure stability of the financial system, the Hindu newspaper reported May 3, citing central bank Governor Yaga Venugopal Reddy.

Indian companies borrowing more than $20 million overseas can’t repatriate the proceeds, while they need the central bank’s permission to bring back funds up to $20 million, according to current government regulations.

The annual pace of growth in India’s industrial production more than halved to 3 percent in March from 8.6 percent in the previous month. The gain was the smallest since February 2002.

Source : Bloomberg

Gold edges down as dollar weighs

Gold edged down on Friday as resilience in the dollar hampered investor buying, although crude oil prices clawed back toward $125 a barrel.

Analysts said many investors are now focused on the oil market, resulting in a halt or even an outflow of money into non-oil commodities, in particular precious metals.

Underlining a fall in investor appetite in the gold market, gold holdings in the world’s largest exchange-traded fund (ETF) for bullion, StreetTRACKS Gold Shares, fell slightly after hitting a peak last week.

Also, gold has been stuck in an $850-$890 band this month.

"Trade is centred in the crude oil market as investors are prepared for inflation. They also buy stocks, but not the other commodities," said Yuki Sonoda, an adviser at Japanese brokerage Daiichi Commodities Co.

"The crude oil market has been consolidating after hitting a record high. But there are signs it is gaining momentum, showing a sharp contrast to the gold market," he said.

Spot gold was at $880.30/881.20 an ounce as of 0404 GMT, compared with $881.55/882.75 in late New York trade on Thursday, when it hit a high of $887.50 on a weakening dollar.

Gold held in StreetTRACKS Gold Shares fell to 589.46 tonnes this week after topping 590 tonnes earlier this month in a brief recovery from a seven-month trough of 580.46 tonnes.

Oil prices rebounded to near $125 a barrel on Friday, led by the bullish heating oil market as China and Europe scramble for barrels, thinning global supply.

US crude for June delivery was up 81 cents a barrel at $124.93, off a record near $127 marked on Tuesday.

The foreign exchange market provided little help, with the dollar stuck in a narrow range against the euro.

The euro rose to $1.5477, up 0.2 percent from late New York trade on Thursday and off last week’s peak above $1.55.

Against the yen, the dollar was little changed at 104.65 yen, having slipped from around 104.89 yen after data showed Japan’s Economy grew 0.8 percent in January-March from the previous quarter, above market expectations for a 0.6 percent increase, for an annualised increase of 3.3 percent.

The most active June gold futures contract on the COMEX division of the New York Mercantile Exchange rose $1.3 to $881.3 an ounce.

Yen-based gold futures for distant April delivery on the Tokyo Commodity Exchange rose 45 yen a gram to 2,989 yen.

Spot platinum stood at $2,062/2,080 an ounce, down from $2,079/2,094 in New York on Thursday, when it hit a one-week trough of $1,988.50.

Platinum has been supported at around $2,000 amid speculation that platinum specialist Johnson Matthey may provide a bullish outlook in an annual report on platinum group metals due next week.

Daiichi Commodities’ Sonoda said scattered buying by Japanese auto makers has propped up the white metal this month.

Palladium was at $432.50/440.50 an ounce, little changed from $432/440 in late New York. Silver was at $16.74/16.80 an ounce, against $16.70/16.76 in New York.