Market may extend Friday's losses on weak Asian stocks; Jubilant Foodworks IPO opens today

The market may extend Friday (15 January 2010)'s losses on weak Asian stocks. US markets fell on Friday after JP Morgan Chase & Co. reported a loss in retail banking and after US consumer confidence trailed forecasts.

Jaiprakash Associates, GAIL India and Sesa Goa will unveil Q3 results today, 18 January 2010. Investors will eye the response to the initial public offer (IPO) of fast-food chain Jubilant Foodworks. A strong response to the IPO may boost the market. The company has fixed IPO price band of Rs 135-Rs 145 per share. The IPO opens for subscription today, 18 January 2010 and closes on 20 January 2010

The finance ministry is reportedly likely to keep the corporate tax rate unchanged at 30% in the coming budget, as it faces stiff resistance from companies to the draft direct tax code's proposal to cut the rate to 25% and remove all exemptions. The Central Board of Direct Taxes, the key government body that formulates and administers tax policy, is not willing to cut rates, as any reduction in statutory rate will further reduce the effective rate and dent the government's revenues. The government is already struggling with a 16-year high fiscal deficit, equivalent to 6.8% of the gross domestic product for the 2009-10 fiscal year.

Meanwhile, the stock market regulator the Securities and Exchange Board of India (SEBI) reportedly wants the government to scrap tax benefits for corporates investing in mutual funds (MFs), a proposal, if accepted by the government, could deal a body blow to local asset management companies and other firms.

Food prices are expected by some economists to drive headline wholesale inflation to 8% by the end of March and with economic growth at 7.9% in the September 2009 quarter, the RBI may begin its retreat from crisis policies. At the same time, the central bank is under heavy pressure from the government not to derail growth momentum. The headline inflation jumped to a one-year high in December 2009, reinforcing views the Reserve Bank of India (RBI) will start increasing reserve requirements later this month to contain price pressures as the economic recovery strengthens.

The wholesale price index rose 7.3% in December 2009 from a year earlier, its highest since November 2008 and accelerating from a 4.8% gain in November 2009. Data also showed last week that industrial output grew at faster-than-expected 11.7% in November 2009 from a year earlier

In stock-specific news, net profit of UltraTech Cement declined 17.76% to Rs 196.03 crore on 1.29% rise in sales to Rs 1651.81 crore in Q3 December 2009 over Q3 December 2008. The company announced the result on Saturday, 16 January 2010.

The world will likely continue to live with ripple effects from the financial crisis for years, World Bank President Robert Zoellick said on Friday. Speaking at a news conference in Berlin, Zoellick said the World Bank estimated that a further 64 million people would fall into extreme poverty between 2009 and 2010 as a result of the crisis.

Asian stocks fell on Monday after JP Morgan Chase & Co. reported a loss in retail banking, US consumer confidence trailed forecasts and commodity prices sank. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.11% to 1.83%.

US stocks slid from 15-month highs on Friday after JPMorgan Chase & Co reported deep fourth-quarter loan losses that raised concerns about earnings for the banking industry. The Dow Jones industrial average plunged 100.90 points, or 0.94%, to 10,609.65. The Standard & Poor's 500 Index was down 12.43 points, or 1.08%, to 1,136.03. The Nasdaq Composite Index shed 28.75 points, or 1.24%, to 2,287.99.

Also weighing on stocks was consumers' caution about the economy as reflected in the Reuters/University of Michigan Surveys of Consumers. It showed preliminary sentiment was weaker than expected in early January due to worries over income and high unemployment.

Other data on Friday showed US consumer prices rose modestly while industrial output rose, suggesting the economy was growing but not generating enough inflation to trouble the Federal Reserve. Investors' appetite for riskier assets fell due to doubts about Greece's fiscal health. European Central Bank President Jean-Claude Trichet said Greece must work out its own economic problems

US markets remain closed on Monday, 18 January 2010 for Martin Luther King Jr. Day.

Closer home, the key benchmark indices ended a choppy trading session lower on Friday, 15 January 2010, defying mostly higher global stocks and snapping previous two days' gains. The BSE 30-share Sensex fell 30.57 points or 0.17% at 17,554.30 on that day.

As per provisional figures on NSE, foreign funds sold shares worth Rs 930.09 crore and domestic funds bought shares worth Rs 680.95 crore on Friday.