Market may open flat to slightly higher

Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could gain 8.50 points at the opening bell. Soon after the government's announcement of foreign direct investment (FDI) in multi-brand retail Trinamool Congress (TC) chief Mamata Banerjee had set a 72-hour deadline for the government to rollback its decisions on diesel price hike and cutting supply of subsidised LPG cylinders and FDI in multi-brand retail. A meeting of the parliamentary partly of Trinamool Congress is scheduled today, 18 September 2012, to discuss the issue. Bhushan Steel turns ex-dividend today, 18 September 2012, for dividend of 50 paise per share for the year ended 31 March 2012 (FY 2012). Hindustan Copper turns ex-dividend today, 18 September 2012, for dividend of Rs 1 per share for FY 2012. Jaiprakash Associates turns ex-dividend today, 18 September 2012, for final dividend of 50 paise per share for FY 2012. Jaypee Infratech turns ex-dividend today, 18 September 2012, for final dividend of 50 paise per share for FY 2012. Hindalco Industries said that it has achieved financial closure for its Rs. 13195 crore greenfield Aditya Aluminium smelter project at Lapanga in Odisha. The project has been funded in a debt equity ratio of 75:25 with a debt component of Rs. 9896 crore. The debt carries a tenor of 12.5 years and is priced at the SBI base rate plus 125 basis points (bps) which presently works out to 11.25% p.a. SBI Capital Markets and IDBI Bank led the debt syndication, which saw a huge participation from almost the entire banking community with a total of 28 commercial banks and financial institutions participating in the transaction. PSU OMCs will be focus after the Ministry of Petroleum & Natural Gas on Monday, 17 September 2012, said that PSU OMCs are currently (effective from 16 September 2012) incurring daily under-recovery of about Rs 498 crore on the sale of Diesel, PDS Kerosene and Domestic LPG. The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas reviewed international prices of crude oil and petroleum products during the 1st fortnight of September 2012. The under-recovery on High Speed Diesel (HSD) applicable for 2nd fortnight of September effective 16 September 2012 remains at high level of Rs 13.86 per litre despite last week's price hike, the Ministry of Petroleum & Natural Gas said in a statement. In case of PDS Kerosene and Domestic LPG the under-recoveries are Rs 32.70 a litre and Rs 347 per cylinder respectively for September 2012 as the same are reviewed on monthly basis, the Ministry of Petroleum & Natural Gas said. Tech Mahindra announced after market hours Monday the acquisition of 51% stake on a fully diluted basis in Comviva Technologies, a Bharti Group Company, and a global leader in providing mobile Value Added Services (VAS), Mobile Money and Mobile Payment solutions, for Rs 260 crore. The deal will be subject to regulatory approvals. The new brand identity will be Mahindra Comviva, reflecting the combined strength and spirit of both the entities. As part of this arrangement, Tech Mahindra will make an upfront payment of Rs 125 crore towards the stake acquired and the balance amount of Rs 135 crore will be paid out over a period of five years based, on Comviva achieving mutually agreed performance targets. The current promoters will continue to hold a 20% stake on a fully diluted basis in Comviva, post the deal closure. Commenting on this move, Vineet Nayyar, Executive Vice Chairman, Tech Mahindra said: "This acquisition is a significant step forward, in our vision of being a complete and comprehensive partner to our clients and like always, we are confident of making this a successful venture for our stakeholders. In addition to the market leading capabilities, this will also add to our relationship with large operator groups across the world." "The world of mobility today encompasses wide range of solutions, where customers be it enterprise or consumers are driving their business and entertainment needs through mobility. This acquisition marks our strong intent and entry into the world of mobility products. We are adding significant capability in areas such as payments and VAS," said CP Gurnani, Managing Director, Tech Mahindra. Key benchmark indices edged higher in choppy trade and attained their highest closing level in 13-1/2 months as the government after market hours on Friday, 14 September 2012 announced slew of reform measures. The BSE Sensex was up 78.04 points or 0.42% to 18,542.31 on that day, its highest closing level since 25 July 2011. Foreign institutional investors (FIIs) made heavy purchases of Indian stocks on Monday, 17 September 2012, as per the provisional data. FIIs bought shares worth a net Rs 2252.17 crore on Monday, 17 September 2012, as per the provisional data from the stock exchanges. FIIs bought shares worth a net Rs 2859.80 crore from the secondary equity markets on Friday, 14 September 2012, as per data from Securities & Exchange Board of India (Sebi). The government after market hours on Friday, 14 September 2012, announced liberalization of foreign investment rules in retail, aviation and broadcasting sectors. While the government has allowed up to 51% foreign direct investment (FDI) in multi-brand retail trading (MBRT), in the aviation sector the government has allowed foreign airlines to acquire up to 49% stake in Indian carriers. The Reserve Bank of India Monday, 17 September 2012, announced a reduction of 25 basis points in the cash reserve ratio (CRR) of scheduled banks to 4.5% of their net demand and time liabilities (NDTL) effective the fortnight beginning 22 September 2012 from current 4.75% after mid-quarter review of monetary policy. The reduction in CRR will inject around Rs 17000 crore of primary liquidity into the banking system, RBI said in a statement. The RBI kept its policy rate viz. the repo rate unchanged at 8%, stating that inflationary pressures, both at wholesale and retail levels, remain strong. As inflationary tendencies have persisted, the primary focus of monetary policy remains the containment of inflation and anchoring of inflation expectations, RBI said. While the recent upward revision in diesel prices and rationalisation of subsidy for LPG is a significant achievement, in the short-term, there will be pressures on headline inflation, RBI said. Over the medium-term, however, it will strengthen macroeconomic fundamentals, RBI said. Over the longer run, holding down subsidies to under 2 per cent of GDP as indicated in the Union Budget for 2012-13 is crucial to manage demand-side pressures on inflation. Containing inflationary pressures and lowering inflation expectations warrant maintaining the momentum of recent policy actions to step up investment, alleviate supply constraints, and improve productivity, RBI said. RBI said since the FQR while growth risks have increased, inflation risks remain. Mitigating the growth risks and taking the economy to a higher sustainable growth trajectory requires concerted policy action across a range of domains, a process to which last week's actions made a significant contribution, RBI said. Monetary policy also has an important role in supporting the growth revival, RBI said. However, in the current situation, persistent inflationary pressures alongside risks emerging from twin deficits – current account deficit and fiscal deficit - constrain a stronger response of monetary policy to growth risks, RBI said. Accordingly, as this process evolves, the stance of monetary policy will be conditioned by careful and continuous monitoring of the evolving growth-inflation dynamic, management of liquidity conditions to ensure adequate flows of credit to productive sectors and appropriate responses to shocks emanating from external developments, RBI said. Finance Minister P. Chidambaram, Monday, 17 September 2012, said the government will unveil more measures to narrow fiscal deficit and to boost economic growth, which may encourage the central bank to cut interest rates at its next monetary policy review on 30 October 2012. He didn't elaborate on what the measures could be. Mr. Chidambaram also said he wasn't disappointed about the RBI's latest decision. RBI is scheduled to under Second Quarter Review of Monetary Policy - 2012-13 on 30 October 2012. Meanwhile, the government's attempts to boost economy by allowing foreign direct investment in retail, its decision to raise diesel prices and restrict allotment of subsidies cooking gas cylinder to households and disinvestment in of stake in state-run companies have sparked protests across the political spectrum. Eight non-Congress, and non-BJP parties - including Samajwadi Party (SP), CPI, CPM, BJD and TDP - have decided to called for a nationwide bandh on Thursday, 20 September 2012, against a clutch of government decisions like allowing FDI in multi-brand retail, disinvestment in navratna companies, hike in diesel price and cut in subsidy on gas cylinders. The Bharatiya Janata Party (BJP) has already given call for a 'Bharat Bandh' on the same day. But NDA constituent Shiv Sena decided to stay away from the strike call, citing Ganesh festival as the reason. The Maharashtra Navnirman Sena (MNS), led by Raj Thackeray, has also announced that MNS will not be a part of the shutdown call citing similar reasons. Opposition parties and some allies of the government are demanding rollback of diesel price hike due to worries that inflation would accelerate. Their opposition to FDI in multi-brand retail is due to fears that the entry of foreign retail giants like Wal-Mart Stores Inc. and Carrefour S.A. will force numerous small shopkeepers and kirana shops to close down. The Full Planning Commission, chaired by Prime Minister Manmohan Singh on Saturday approved the 12th Five Year Plan document. The plan which extends from 2012 to 2017 has lowered the economic growth target across five years to 8.2%. Besides other things, the 12th Plan seeks to achieve 4% agriculture sector growth during the Plan period. The growth target for manufacturing sector has been pegged at 10%. The Cabinet Committee on Political Affairs (CCPA) raised price of heavily subsidised diesel by Rs 5 per liter on Thursday, 13 September 2012 to balance government's fiscal deficit situation. The CCPA also restricted the supply of subsidized LPG cylinders to each consumer to six cylinders (of 14.2 kg) per annum. Finance Minister P. Chidambaram early this month said that India is making consistent efforts to check the abuse of a double-taxation-avoidance pact it has with Mauritius. India has in the past said it is considering a review of the treaty in an effort to boost tax revenue. An India-Mauritius joint working panel was set up in 2006 to put in place adequate safeguards for preventing the misuse of the double-taxation-avoidance agreement between the two countries. India, in the past, has said that Mauritius was unwilling to cooperate on this issue. Mauritius says it has taken India's concerns seriously. Traditionally, Mauritius has accounted for nearly 40% of India's foreign investment. Under the avoidance of double taxation treaty, companies that invest through Mauritius do not have to pay tax in India but only have to pay tax in the island. But capital gains tax is close to zero in Mauritius, making it a popular investment hub. India wants to renegotiate the double taxation treaty with Mauritius to check round-tripping, in which money is moved out of one country to another and brought back under the garb of foreign capital, taking advantage of tax breaks. Meanwhile, a committee appointed by the government to review the controversial general anti-avoidance rules (GAAR) early this month suggested deferring the implementation of anti-avoidance rules by three years. "Where Circular No. 789 of 2000 with respect to Mauritius is applicable, GAAR provisions shall not apply to examine the genuineness of the residency of an entity set up in Mauritius," the committee said. The committee has also recommended that the government should abolish the tax on gains arising from transfer of listed securities, whether in the nature of capital gains or business income, to both residents as well as non-residents. The panel has said the government might consider increasing the rate of Securities Transaction Tax (STT) appropriately to make the proposal tax neutral. At present, short-term capital gains on equities are taxable at the rate of 15%. Holding period of less than one year is considered as short term. There is no long term capital gains tax on sale of shares. Business income is taxed at 30%. Distinguishing capital gains and business income depends on several factors, and disagreements have resulted in numerous litigation cases between the Revenue Department and taxpayers, the committee said in its report. Asian stocks fell Tuesday on concern Europe's debt crisis remains unresolved, the U.S. economy is slowing and a dispute between Japan and China is worsening. Key benchmark indices in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan shed by between 0.07% to 0.45%. Japan's Nikkei Average rose 0.14%. The worst diplomatic crisis between China and Japan since 2005 is putting at risk a trade relationship that's tripled in the past decade to more than $340 billion. Toyota Motor Corpoation, Honda Motor Co. and Panasonic reported damage to their operations in China as thousands of people marched in more than a dozen cities on Sept. 16 after Japan last week said it will purchase islands claimed by both countries. Protesters called for boycotts of Japanese goods and in some instances smashed store fronts and cars. Japan's central bank, Bank of Japan, holds two-day policy meeting on interest rate in Japan on 18 and 19 September 2012. Profit-taking saw U.S. stocks snap a five-session winning streak on Monday. Fresh quantitative easing measures, known as QE3, unveiled by the Federal Reserve on Thursday had helped spur Wall Street to mulityear highs last week. The Federal Reserve Bank of New York said yesterday its general economic index of manufacturing dropped to minus 10.41, the lowest reading since April 2009, from minus 5.85 in August. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.