Market may open higher on positive Asia; RIL eyed

The market may open higher extending Friday (20 November 2009)'s gains on positive Asia. The equities may remain volatile over the next few days as traders rollover positions in the derivative segment from November 2009 series to December 2009 series ahead of the expiry of the near month November 2009 contracts on Thursday, 26 November 2009.

The government has not yet chalked out a roadmap to withdraw stimulus in the first half of 2010, the junior finance Minister Namo Narain Meena said on Friday. Early in November, Prime Minister Manmohan Singh had said the government would take appropriate action next year to wind down stimulus.

Mass protests by sugarcane farmers backed by political opposition parties forced the parliament to adjourn for a second day on Friday, 20 November 2009 a major headache for the ruling Congress party. The standoff over price deregulation highlights the difficulty Congress faces to balance the implementation of long-stalled financial reforms with the demands of its large rural base.

The government has set reform of the insurance sector as a priority for the winter parliament session that began on 19 November 2009. The bill, which was stalled in the last parliament, proposes raising the foreign investment limit in insurance companies from 26 % to 49%. The government also wants to open up the pension sector to private and foreign firms and give equal voting rights to foreigners in private-sector banks, which are currently limited to 10% irrespective of their actual holding.

Meanwhile, the government and the Reserve Bank of India (RBI) have decided to withdraw starting next January a facility that allowed Indian firms to buy back foreign currency convertible bonds (FCCBs) issued to overseas investors, in yet another move to unwind measures introduced last year at the height of the global credit crisis. Companies that have issued such bonds, which have both debt and equity features, will have to convert them into shares or redeem them at face value, depending on investor preference.

In addition to the decision to discontinue the special facility for buying back FCCBs, the government has already proposed doing away the relaxation on pricing foreign borrowings another measure announced last year to help Indian companies raise funds during the credit crunch. This is aimed at containing capital flows, which continue to be strong this year and have crossed the $15-billion mark.

The government is not considering imposing a tax to curb an influx in overseas funds, and indeed wants an increase in inflows, the deputy chairman of the government's planning commission Montek Singh Ahluwalia said on Friday. He said foreign funds were needed for developing infrastructure such as road projects and were unlikely to create asset price bubbles.

He said flow of funds could become a "real problem" by next year, and India would perhaps have no other option but to impose restrictions. Higher capital inflows have resulted in currency appreciation mainly in Asia and Latin America, prompting central banks contemplate a range of measures to hold back the tide.

ICICI Bank may see action after bank said on Saturday it raised $750 million (about Rs 3,500 crore) through an overseas bond issue, at an yield of 5.5 %.

Reliance Industries (RIL), will be in action on reports company has put a bid to acquire bankrupt chemicals maker LyondellBasell Industries AF. RIL said on Saturday evening that it had submitted a preliminary non-binding offer to acquire, for cash, a controlling interest in Rotterdam, Netherlands-based LyondellBasell.

RIL also said it is "reviewing a number of global opportunities for growth in its core business," including LyondellBasell. The conglomerate said its offer is "preliminary and subject to customary conditions, including conduct of due diligence, documentation and receipt of creditor support."

Meanwhile, the initial public offer of Cox and Kings, a global tour operator, was subscribed 6.31 times. The bidding for the issue was closed on Friday, 20 November 2009.

Most of Asian Stocks edged higher on Monday for first time in three days, on signs the economic recovery is gathering pace. The key benchmark indices in China, HongKong, Singapore and Taiwan rose by between 0.01% to 0.6%. The key benchmark indices in South Korea and Indonesia fell by between 0.01% to 0.16%. Japanese market remained closed on Monday due to holiday.

US markets ended flat with a positive bias after a rocky session on Friday 20 November 2009 as investors juggled a disappointing jobs report and some analyst upgrades. General Electric was the biggest gainer on the Dow, up 6.2%, after Oppenheimer and Bernstein, raised their ratings on the stock to outperform.

The Dow slipped 14.28 points, or 0.1%, to 10,318.16. The S&P 500 index was down 3.52 points, or 0.3%, to 1,091.38, while the Nasdaq Composite Index fell 10.78 points, or 0.5%, to 2,146.04.

The economic data for came in worse than expected. The labor department said employers cut 190,000 jobs in October 2009 and the unemployment rate jumped to 10.2% its highest level in more than 26 years. In other data, wholesale inventories fell 0.9% in September 2009 and consumer borrowing fell by $ 14.8 billion in September.

Back home, the key benchmark indices snapped last two days' losses, taking cue from higher European stocks on Friday 20 November 2009. Comments by the deputy chairman of the government's planning commission that the government is not considering imposing a tax to curb an influx in overseas funds also helped ease worries of likely measures from the policymaker to temper inflows.

The BSE 30-share Sensex rose 236.20 points or 1.41% to 17021.85 on Friday.The S&P CNX Nifty regained the psychological 5,000 mark after falling below that level on Thursday, 19 November 2009. The Sensex regained the psychological 17,000 mark.

As per provisional data, foreign funds on 20 November 2009, sold stocks worth a net Rs 463.89 crore. Domestic funds bought equities worth a net Rs 18.46 crore