Market set for an uncertain start

The market is set for an uncertain start on mixed Asian stocks. The volatility may remain high as investors may remain cautious after the recent surge in indices.

The government has set reform of the insurance sector as a priority for the winter parliament session that begins today, 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. Prime Minister Manmohan Singh said recently India is ready to increase the pace of reform, and the government has flagged stake sales in state firms and tax changes to help to plug a large budget deficit.

The government kicked off the discussion process towards consolidation in the banking sector at a meeting with senior bankers on Wednesday. The finance ministry has been urging banks since the last few years to start the process of mergers and acquisition on a voluntary basis, but none of the state-run banks have shown any initiative on this.

Meanwhile, the government is taking its first significant step to ward off a surge in foreign capital inflows that may threaten the stability of the financial system by drawing up new rules that will make overseas loans costlier for companies. The government is finalising plans to auction corporate entitlements to borrow abroad, a pre-emptive move relaying the message that the country is determined not to allow unruly capital inflows to disrupt the incipient economic recovery.

Finance Minister Pranab Mukherjee said on Wednesday the country is monitoring foreign capital inflows and the current higher inflows are not a matter of concern. Indian stocks have risen sharply this year on robust inflow from foreign funds. Indian officials had said on recent occasions that they welcomed fund inflows, but Mukherjee on Wednesday also noted that India is ready to deal with the flows if they become a problem. We have a system of monitoring inflows, he said.

Meanwhile, the initial public offer of Cox and Kings, a global tour operator, was subscribed 60% on the first day of bidding today. The price band has fixed at Rs 316-330 per share and the issue will close for subscription on 20 November 2009. Face value per share is Rs 10.

In a bid to speed up the process of fund mobilisation and listing, the Securities and Exchange Board of India (Sebi) is working towards bringing down the time frame for listing of an IPO on the stock exchange to seven days from the current 20 days.

Asian markets were trading mixed on Thursday. Doubts about the pace of economic recovery resurfaced with Japanese stocks falling to a four-month low, as share-sale plans at Japanese companies raised concern the value of existing holdings will be reduced. The key benchmark indices on China, HongKong and Japan fell by between 0.31% to 0.96%. The key benchmark indices in South Korea, Singapore and Taiwan rose by between 0.18% to 1.16%.

U.S. stocks fell on Wednesday on worrisome outlooks from major software makers and as a surprise drop in new home construction last month prompted concern about the strength of an economic recovery. The Dow was down 11.11 points, or 0.1%, to 10,426.31. The S&P 500 index slipped 0.52 points, or 0.1%, to 1,109.80, while the Nasdaq fell 10.64 points, or 0.5%, to 2,193.14.

Driving the losses in the US markets were some disappointing economic data. Housing starts unexpectedly fell 10.6% in October 2009 to the lowest level in six months, weighed down by a sharp decline in construction activity for both single-family and multi-family dwellings. The consumer price index rose 0.3%, indicating that inflation may not be quite as benign as some economists have indicated.

Bsck home, volatility ruled the roost on Wednesday as the key benchmark indices edged lower with investors cashing in on gains after a sharp rally in the past few days. The BSE 30-share Sensex fell 51.87 points or 0.3% to 16998.78 on Wednesday.

As per provisional data on NSE, foreign funds bought shares worth Rs 412.13 crore and domestic funds sold shares worth Rs 256.73 crore on Wednesday.