Market seen halting four-day rally on subdued global cues

The market is likely to end its four-day winning streak following subdued global cues. The S&P CNX Nifty futures for December 2009 expiry were trading 6 points lower in Singapore. Aviation stocks may see action on reports the new ground handling policy implementation has been deferred by a year.

Trading volumes are likely to take a hit in the last week of the calendar year 2009 as most foreign fund managers will be on year-end vacation. The market is closed on Friday, 1 January 2010 for New Year holiday.

Volatility may zoom as traders roll positions in the derivative segment from December 2009 series to January 2010 series ahead of the expiry of the near-month December 2009 contracts on Thursday, 31 December 2009. As per reports, rollover of Nifty positions from December 2009 series to January 2010 was 50% while the marketwide rollover stood at 49%, as on Tuesday.

Highest rollover was seen in power stocks and auto stocks. Reliance Power saw a rollover of 73% while 72% positions were rolled over in Mahindra & Mahindra. Among sectors, high rollover was seen in telecom, banking and FMCG stocks while Pharma and IT stocks saw low rollover. Real estate stocks clocked least rollover.

Aviation stocks may see action on reports the new ground handling policy implementation has been deferred by a year. The Cabinet Committee on Security has decided that tarmac side ground handling will be outsourced to three companies.

The Cabinet Committee on Security met in Delhi on 29 December 2009 and the decision that they have taken comes as a major relief to airlines. They will now allow airlines to continue doing ground handling in the terminal building and that is what most of the airlines are right now doing.

The focus of India's monetary policy is shifting to managing recovery and containing inflation from one concentrated on fostering growth after the global downturn, Reserve Bank of India deputy governor Shyamala Gopinath. She said rising food prices were fuelling concerns of broader price pressures in India and the policy challenge was to address the supply-side constraints.

She said effective assessment of the inflation process and using monetary policy actions at the right time would be critical. Gopinath's comments follow those from fellow Deputy Governor Subir Gokarn on Thursday, 24 December 2009, who said the January 2010 policy review would focus both on growth and inflation, instead of the previous policy focus on growth.

Meanwhile, reacting to media report, petroleum secretary R S Pandey today said the government has no immediate plans to raise fuel prices. A recent media report had indicated that auto fuel prices could increase anytime early next year.

Prime Minister Manmohan Singh said on 28 December 2009 that the economy will grow at 7% or a little more in 2009-10. Inaugurating the 92nd annual conference of Indian Economic Association (IEA), Manmohan Singh put a strong defence saying in post-liberalisation the economy all along looked up till the global meltdown hit the growth pace.

India's infrastructure sector grew an annual 5.3% in November 2009, Trade Minister Anand Sharma said on Thursday. Infrastructure sector output grew 3.5% in October 2009 from a year earlier. The sector accounts for 26.7% of the country's industrial output.

Food price index rose 18.65% in the 12 months to 12 December 2009, data released by the government on 24 December 2009, showed. The primary article index jumped 14.66% and the fuel price index rose 3.95%. The worst monsoon in nearly four decades and flooding in some parts of the country have pushed up food prices.

Finance Minister Pranab Mukherjee said last week that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term. Mukherjee added that the government is open to altering the proposed draft direct tax code further informing that sustaining high economic growth remains a priority for the government. The draft code has proposed various reform measures, including cutting in corporate tax rate to 25% and streamlining tax laws.

The Indian economy can grow at 7.75% in the fiscal year ending March 2010, the Finance Minister said. He also told an industry conference in New Delhi that agriculture output must grow 4% for the economy to expand 9-10% annually. The government will wait until the February 2010 budget to consider withdrawing some of the fiscal stimulus measures, the Finance Minister said.

The latest data showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

A record fund raising plans by Indian firms could suck liquidity from the secondary market. As per one report, Indian companies have lined up equity raising plans of Rs 150000 crore in calendar 2010, close to two-and-a-half times of what they raised through share sales in the year about to end on 31 December 2009.

Emerging-market equity funds inflows tripled last week as the outlook improved for developing-nation exporters, EPFR Global said on Monday. The funds attracted $1.7 billion in the week ended 23 December 2009 from $571.4 million in the previous week, EPFR said in a statement. That added to a record $80.3 billion of investments in emerging-market stock funds so far this year, compared with outflows of $48 billion in the same period in 2008, EPFR said.

Asia ex-Japan Equity Funds also posted modest inflows of $179 million for the week, with investors in this region rotating some exposure from smaller markets like Taiwan and Singapore to bigger ones such as China. China Equity Funds took in another $153 million, maintaining their record-setting pace, and dedicated BRIC Equity Funds also remain on track for a record setting year after absorbing another $451 million.

Most Asian markets were trading lower for the first time in three days as Japan Airlines Corporation tumbled on reports the carrier's biggest lenders oppose a plan to restructure the company through bankruptcy. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore declined by between 0.16% to 0.70%. However indices in China and Taiwan rose 1.05% and 0.43% respectively.

Japan's government set an economic growth target of more than 2% for the coming decade, a pace that's about four times the central bank's estimate of the nation's current speed limit.

The target was released in a statement after a meeting of Prime Minister Yukio Hatoyama's cabinet in Tokyo today on its long-run economic strategy. The government said it's aiming for 1.4 million additional jobs in the environmental industry, 2.8 million posts in health care, and 560,000 positions in tourism by 2020, along with expanded Asian trade, to bolster growth.

Meanwhile, South Korean manufacturers' confidence rose for the first time in three months after the government raised its economic-growth forecast for Asia's fourth-biggest economy.

An index measuring expectations for January climbed to 90 from 85 a month earlier, according to a survey of 1,488 manufacturers released by the Bank of Korea today in Seoul. A measure of non-manufacturing companies' expectations was unchanged at 84 for the third straight month.

Wall Street ended with marginal losses on Tuesday, 29 December 2009 following the dollar's rebound. Economic data failed to provide any support either.

The Dow Jones industrial average slipped 1.67 points, or less than 0.1%, to 10,545.41. The Standard & Poor's 500 index was down 1.58 points, or 0.1%, to 1,126.20, while the Nasdaq Composite Index was down 2.68 points, or 0.1%, to 2,288.40.

Among economic data, the conference board's gauge of consumer confidence rose to 52.9 in December 2009 from 50.6 in November 2009.

Back home, key benchmark indices extended gains for the fourth straight session on Tuesday, 29 December 2009, on sustained buying demand for pivotals. The BSE 30-share Sensex was up 40.95 points or 0.24% to 17,401.56, its highest closing since 16 May 2008. The S&P CNX Nifty was up 9.55 points or 0.18% to 5187.95, its highest level since 5 May 2008.

As per provisional data on NSE, foreign funds sold shares worth Rs 53.73 crore and domestic funds bought shares worth Rs 3.19 crore on Tuesday, 29 December 2009.