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Tuesday, December 27, 2011

Market may open lower on weak Asian stocks


The market may open lower on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 21.50 points at the opening bell. High volatility is expected on the bourses this week as traders roll over positions in futures & options (F&O) segment from the near-month December 2011 series to January 2012 series. The near-month December 2011 F&O contracts expire on Thursday, 29 December 2011.

Key benchmark indices reached their highest closing level in nearly two weeks on Monday, 26 December 2011 as strong economic data in the US boosted sentiment. US is the world's biggest economy. The BSE Sensex jumped 232.05 points or 1.47% to settle at 15,970.75, its highest closing level since 13 December 2011.



Foreign funds bought equity shares worth Rs 113.43 crore on Monday, 26 December 2011, as per provisional data from the stock exchanges. FIIs had bought shares worth Rs 84.27 crore on Friday, 23 December 2011. Before last two days of buying, FIIs were net sellers for ten days in a row from 9 to 22 December 2011. FIIs have sold shares worth a net Rs 1602.35 crore so far this month (till 22 December 2011), as per provisional data from the stock exchanges.

Telecom stocks will be in focus after the telecoms secretary said on Monday, Telecom Commission has not ruled out levying a one-time fee on operators holding spectrum beyond 6.2 mega hertz and favours an auction-based pricing for future spectrum allocations. R. Chandrashekhar, the top bureaucrat in the telecoms ministry, also said the commission had accepted the sector regulator Telecom Regulatory Authority of India's proposals on mergers and acquisitions rules by and large.

Advance tax collection from the country's top 100 companies, as per the final numbers, declined by 1.4% to Rs 30763 crore in the third quarter of 2011-12, indicating sluggishness in economy. Advance taxes are collected in four installments -- 15% by 15 June; 40% by 15 September; 75% by 15 December and 100% by 15 March.

A government statement in parliament last month dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam has said that the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

Prime Minister Manmohan Singh said on Thursday, 22 December 2011 he was disappointed to hear negative comments from industry leaders that the government's policies were leading to a slowdown. Singh, who met members of his Trade and Industry Council, said such comments strengthened negative forces who had no stake in the country's development. The UPA government has been battling criticism over its handling of the economy and the perception of policy paralysis in the aftermath of a string of scandals which hit the headlines since last year. Several top industrialists had written to the government expressing frustration at the slow pace of reforms and the gloomy atmosphere.

Credit rating agency Moody's Investors Service on 14 December 2011 said that the recent sharp decline in the value of the Indian rupee against the dollar is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground.

India's infrastructure sector output grew 6.8% in November from a year earlier, sharply higher than the annual growth of 3.7% in November last year, government data showed on Monday. The infrastructure sector accounts for 37.9% of India's industrial output.

The food inflation eased sharply to 1.81% in the year to 10 December 2011, from an annual 4.35% rise in the previous week, government data showed on Thursday, 22 December 2011. The fuel inflation remained unchanged at 15.24% in the latest week compared with the prior week, data showed, while the primary articles price index rose 3.78%, compared with an annual rise of 5.48% in the previous week.

At its mid-quarterly monetary policy review meet on Friday, 16 December 2011, the Reserve Bank of India (RBI) left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI said in a statement. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI said.

RBI said inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. RBI also said that the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

India may face the risk of stagflation if the government doesn't take urgent steps to tame inflation and stimulate growth, a parliamentary panel on finance warned on Thursday, 22 December 2011. The Standing Committee on Finance blamed the Reserve Bank of India's 13 interest-rate increases over the past 21 months for stalling economic growth. "Measures taken by the government and the RBI so far have squarely failed to rescue the economy from unabated inflation. Instead, monetary measures initiated for this purpose have only resulted in worsening the condition of the economy further," the report said.

Finance minister Pranab Mukherjee on Sunday, 25 December 2011, said he did not think there was any problem in presenting the Budget for 2012-13 on schedule in the wake of the announcement of assembly elections in five states. Mukherjee, however, said the date for the presentation of the budget will be fixed after discussions at various levels. The Union Budget is presented on the last date of February every year.

The Election Commission on Saturday, 24 December 2011, announced the dates for the assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa. Uttar Pradesh will have polling on February 4, 8, 11, 15, 19, 23 and 28, while Uttarakhand and Punjab will go to polls on January 30. Manipur will have polls on January 28 and Goa on March 3.

Asian shares edged lower on Tuesday in thin volume as investors took to the sidelines before U.S. markets reopen later in the day from a long weekend and data which could offer clues over growth prospects in the world's largest economy. European and some Asian markets were closed on Monday. Key benchmark indices in China, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.23% to 0.68%. The stock markets in Hong Kong remained closed for a holiday today.

Bank of Japan (BOJ) minutes for its November 15-16 meeting showed on Tuesday BOJ board members were worried that unstable global financial markets were affecting Japan's markets to some extent.

On Monday, when many markets were closed, Japanese stocks outperformed the rest of Asia in thin trade, with sentiment partly lifted by signs of U.S. economic recovery.

US markets had remained closed on Monday, 26 December 2011 on account of holiday. Investors will be looking for more positive signs from data in the US this week, including the S&P Case-Shiller house price index for October and consumer confidence for December.