Market may extend gains on firm Asian stocks

The market may extend gains for the third straight day toady, 1 March 2011, on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 47 points at the opening bell. As per provisional figures foreign funds sold shares worth Rs 39.86 crore and domestic funds bought shares worth Rs 317.38 crore on Monday when stocks had risen in choppy trade after Finance Minister Pranab Mukherjee laid stress of infrastructure and agriculture in Union Budget 2011-2012. Auto and cement stocks will be in focus as companies start unveiling sales data for the month just gone by.




Asian stocks rose on Tuesday, tracking overnight gains in US shares, which rose on optimistic remarks from influential investor Warren Buffett and positive economic data. The key benchmark indices in China, Indonesia, Japan, Singapore and Taiwan rose by between 0.26% to 1.42%. Hong Kong's Hang Seng fell 0.08%.

China's official purchasing managers' index for February fell to 52.2 from 52.9 in January, the China Federation of Logistics and Purchasing said on Tuesday. It was the 24th straight month that the official PMI has stood above the threshold of 50 that demarcates expansion from contraction

Buffett, chairman of Berkshire Hathaway told shareholders in his widely read annual letter that he saw the need for "major acquisitions". Latest US economic data showed Midwest business activity rose more than forecast in February. In addition, US incomes posted the largest increase since May 2009 last month.

Back home, the Finance Minister announced in the budget 2011-12 on Monday, 28 February 2011, a cut in surcharge on corporate tax on domestic firms to 5% from 7.5% and projected a lower fiscal deficit target of 4.6% for the year ending March 2012 (FY 2012). He said while growth in 2010-11 has been broad-based, food inflation continues to remain a concern. Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation. He added that financial sector reforms will move forward with the Insurance amendment Bill, LIC bill and Pension Development Authority Bill in current session.

The Finance Minister said Goods and Services Tax (GST) bill will be introduced in this session of parliament and that the new Direct Tax Code will be implemented from 1 April 2012. The Finance Minister allowed foreign institutional investors (FIIs) to invest in mutual fund schemes and raised limit the FII investment limit in corporate bonds for investment in infrastructure. He said government will introduce Public Debt Management Bill in 2012.

Mukherjee said Indian economy is back to pre-crisis growth trajectory and that economy is set for double-digit growth in coming years. He said government expects average inflation to be down next year. He added current account deficit poses a concern.

The government will spend Rs 1.6 lakh crore on social projects, up 17% from the last year. The finance minister said the government is on course to introduce the food security bill this year. The new Companies Bill will also be introduced he added. He said the economy is resilient to the external shocks. He said removal of supply bottlenecks in the food sector will be in focus in 2011-12.

The finance minister also proposed the issuance of tax-free bonds worth Rs 30,000 crore for infrastructure financing. Mukherjee said the government intends to spend Rs 2.14 lakh crore as budgetary support for the infrastructure sector in 2011-12, which is 23.3% higher than current year.

The Finance Minister re-iterated the Government's resolve to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner. He said that the Nutrient Based Subsidy (NBS) has improved the availability of fertilizers and the Government is actively considering extension of NBS regime to cover urea.

The finance minister raised tax exemption limit on personal tax to Rs 1.8 lakh from Rs 1.6 lakh. For senior citizens, tax exemption limit has increased to Rs 2.5 lakh from Rs 2.4 lakh and the eligibility age for senior citizens will be 60 years against 65 years earlier. The Rs 20000 exemption for investment in infra bonds has been raised by another year.

The projected fiscal deficit for FY 2011 has been revised downwards to 5.1% from 5.5%. The fiscal deficit for FY 2012 has been projected at 4.6%. The projected fiscal deficit for FY 2013 is 4.1%.

The latest economic data showed the gross domestic product (GDP) growth for the third quarter stood at 8.2% in Q3 December 2010 against 8.9% in Q2 September 2010.