10:00AM New York, 7:30PM Mumbai – Surging inflation on higher food and energy prices have become election issue for the ruling coalition. Rupee struggles against dollar as crude oil reaches another high.

Indian Market Update

The ruling governing coalition is facing intense pressure as inflation surged to a three-year high and food and energy prices remain at elevated level. Much of the inflation is imported as crude oil hover near $132 a barrel but loose credit conditions have also fueled the consumer boom as demand for autos, homes, consumer durables and electronics good rise.

Deputy Chairman of planning commission, Montek Singh Ahluwalia said that the inflation is expected ease in the near future. Montek’s comments come a day after RBI governor suggested that official inflation index may understate the underlying inflation.

The latest read for India''s wholesale price index showed a surge to 7.83% in the week ended May 3, record high since November 2004. The ruling coalition has lowered import duties on a series of items, and curbed some exports to keep domestic prices in check and supplies adequate.

Market Sentiment

Indian shares edged higher in a day of mixed trading with the benchmark index Sensex adding a marginal 0.08% or 12.98 at 17,243.16. On the NSE the S&P CNX Nifty rose 0.3% or 12.7 at 5,117.65.

Of the BSE shares, 1,710 shares gained, 1,009 fell and 76 remained unchanged. Among the 30-member Sensex pack, 16 declined while 14 shares rose.

Turnover

Daily turnover on the BSE stood at 7,077 crore rupees and on the National Stock Exchange the turnover was recorded at 15,279 crore rupees.

Housing Development and Infrastructure was the most active stock on the BSE with a turnover of 400.61 crore rupees followed by Cairn India, Reliance Industries, Reliance Petroleum and Mundra Port & Special Economic Zone.

Russian-India bilateral trade to double by 2010

A Russian official said bilateral trade between the country and India could double in the next two years, touching the record $10 billion from the current $5 billion. Blatislab V Antonyuk, Consul General of the Russian Federation in the Southern India stated energy and infrastructure development are of interest.

Gainers and Decliners

Oil and gas stocks rose as crude rose to a record high near $130 a barrel on Tuesday. BPCL gained 2% to 356.05 rupees and Indian Oil Corporation rose 0.6% to 408.25 rupees.

Reliance Industries advanced 2.5% to 2,667.90 rupees. According to news reports, government has confiscated the company''s five blocks in the Kerala-Konkan basin after it failed to meet the minimum work program.

Metal stocks were mixed. National Aluminium Company climbed 4.62% to 538 rupees, Tata Steel added 3.1% to 922.25 rupees. Hindalco Industries and Steel Authority however traded lower to close 0.9% to 197.25 rupees and 0.7% to 182.55 rupees respectively.

Banking stocks declined. ICICI Bank fell 1.8% to 911.25 rupees. State Bank of India gained 0.4% to 1,661.55 rupees. The bank on Wednesday announced that it will resume tractor and farm equipment loans, apparently under the political pressure. Defaults for equipment loans have been rising.

Mahindra & Mahindra gained 3.1% to 670 rupees, Bharat Heavy Electricals added 2% to 1,771.70 rupees and Tata Motors rose 1.6% to 688.85 rupees.

RBI approves HDFC acquisition