Market may surge on central banks liquidity move; food inflation data eyed

The market is set for a strong start as global stocks rallied after the world's six major central banks moved to tame a liquidity crunch for European banks by providing cheaper dollar funding. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a jump of 158 points at the opening bell.

On the macro front, the government will today, 1 December 2011, will unveil data on some wholesale price indices viz. the food price index, the primary articles index and the fuel price index for the year through 19 November 2011.



Automobile and cement stocks will be in focus as companies from these two sectors start unveiling sales volume data for November 2011 from today, 1 December 2011.

PSU OMCs will be watched as petrol got cheaper by 78 paise per litre in Delhi from Wednesday midnight, belying market speculation of a major price reduction due to a sharp fall of $7 a barrel in international petrol rates.

Key benchmark indices edged higher amidst volatility on Wednesday, 30 November 2011 supported by gains in index heavyweight Reliance Industries (RIL), which jumped nearly 2%. The BSE Sensex was up 115.12 points or 0.72% to 16,123.46.

Foreign institutional investors (FIIs) bought shares worth Rs 34.12 crore on Wednesday, 30 November 2011, as per the provisional data from the stock exchanges. FIIs sold shares worth Rs 6508.70 crore in the November month.

A government statement in parliament has dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam, last week, said 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.

The Indian economy expanded at a substantially lower rate in the second quarter of the current fiscal year as a series of rate increases by the RBI and a global slowdown hurt local demand. India's economy grew 6.9% in Q2 September 2011, in line with expectations, after expanding by 7.7% in the first quarter, government data showed on Wednesday. The manufacturing sector grew an annual 2.7% during the July-September quarter while farm output rose an annual 3.2% the data showed. India's GDP growth in the first six months of FY12 stood at 7.3% versus 8.6% in the corresponding period of the last financial year, the CSO data showed on Wednesday.

The output of the eight infrastructure industries dropped to an over six-year low of 0.1% in October, data released on Wednesday showed, suggesting further slowdown in already wobbly industrial growth. The eight infrastructure industries together have a 38% weight in the index of industrial production (IIP), which makes the infrastructure index a good leading indicator of industrial production.

India's inflation rate will fall sharply over the next few months and the country's economy should hold up despite the global economic slowdown, Prime Minister Manmohan Singh said on Tuesday.

RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably.

Asian shares extended gains on Thursday after the world's six major central banks moved to tame a liquidity crunch for European banks by providing cheaper dollar funding. Key benchmark indices in China, Hong Kong, Japan, Indonesia, Singapore, South Korea and Taiwan were up by between 2.1% to 5.52%.

A move by China on Wednesday to cut the percentage of cash banks must keep as reserves also boosted sentiment. China's factory sector shrank in November for the first time in nearly three years, an official purchasing managers' index showed on Thursday.

US stocks soared by four percent Wednesday after major central banks joined hands to ensure commercial banks would not be undermined by market worries over the eurozone crisis. The Federal Reserve's periodic Beige Book review, released Wednesday, described the US economy growing at a "slow to moderate pace," a slightly more positive phrasing than the previous report on October 19.

The U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said on Wednesday they would lower the cost of existing dollar swap lines by 50 basis points from December 5, and arrange bilateral swaps to provide liquidity for other currencies.