Market may open higher on positive Asian stocks; Tata Steel eyed

The market may open higher on positive Asian stocks. Asian stocks rose on Tuesday, 16 February 2010 led by Australian financial companies as earnings reports boosted confidence that economic conditions are improving. The key benchmark indices in Japan, Indonesia and South Korea rose by between 0.22% to 0.6%.Most Asian markets are shut on Monday and Tuesday for the Lunar New Year holidays.

US markets were closed on Monday 15 February 2010 for the Presidents' Day holiday.

Euro zone states urged Greece on Monday to announce more deficit-control steps by mid-March if needed, but said nothing new of last week's pledge to defend the country if debt market pressures spin out of control. At talks among finance ministers, Greece asked the euro zone to bear with its fiscal plans as announced, and warned that last week's offer of support by EU leaders may not be enough to stem a debt market squeeze on governments in the region.

The headline inflation in January accelerated to its fastest pace in more than a year, vaulting above the Reserve Bank's end-March inflation forecast and putting more pressure on the bank to raise borrowing rates. The inflation data comes on the heels of a 16.8 % annual surge in industrial output in December.

The wholesale price index rose 8.56 % in January from a year earlier, its highest since November 2008 and accelerating from a 7.3 % gain in December, data showed on Monday. In January, the Reserve Bank of India (RBI) had raised the wholesale price inflation forecast for the current year to end-March to 8.5 % from 6.5 %. The government on Monday also revised up the headline number for November to 5.6 % from 4.8 %, a sign of even more inflationary pressure. The rise was driven by a 17.4 % jump in food prices, which rose because of weak monsoon rains and flooding. Inflation in manufacturing picked up to 6.55 % from about 5 % in December, a sign that inflationary pressures were spreading to other sectors of the economy.

Higher-than-expected government borrowing in the budget might hold off the central bank from aggressively raising rates as it would push up borrowing costs. The RBI governor Duvvuri Subbarao said on Saturday that government borrowing influences monetary policy.

The Reserve Bank of India is widely expected to raise borrowing rates at its April review after it surprised markets with a bigger-than-expected rise in banks' cash reserve requirements in January. The government completed its market borrowing of Rs 4,51,000 crore ($97 billion) for the current fiscal year to end-March early this month and the RBI expects its gross market borrowing next year to be slightly higher than this year. Economic recovery in Asia has led to inflation resurfacing across the region, which has evoked stronger responses from the region's central banks. China on Friday 12 February 2010 surprised global markets by lifting bank reserve requirements for a second time in two months. The RBI governor, however, has said the bank could not just focus on inflation given growth concerns and a central banker last week said only an "unprecedented, unwarranted" event.

Purchasing managers' index showed last week manufacturing activity in January grew at its fastest pace in almost 1-1/2 years, boosted by a sharp rise in new export orders, while car sales in January rose an annual 32.3%.

The government has been reluctant to commit any rollback in fiscal stimulus but with the economy increasingly looking on a solid footing, there are expectations that it would lay out a roadmap for a stimulus withdraw in its 26 February 2010 annual budget. Last week, the finance minister said India's economy would grow around 7.75% in the fiscal year ending March.

The government on Monday amended rules for foreign currency convertible bonds (FCCB) to allow issuers to revise their conversion price, a move aimed at reducing price uncertainty in a volatile equity market. The change will give issuers a window of 6 months to adjust the conversion price of their bonds to the higher of either the two weeks average or the six months average of the issuing company's stock.The decision unveiled by the finance ministry applies to companies that issued FCCBs before 27 November 2008.

Among stocks news, India's largest steel maker Tata Steel will announce its consolidated Q3 December 2009 result today.

The key benchmark indices fell on Monday, 15 February 2010 on worries the central bank may take more monetary action to check inflation after the latest data showed that the headline inflation jumped in January 2010. The BSE 30-share Sensex fell 114.24 points or 0.71% to 16038.35 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 195.99 crore and domestic funds sold shares worth Rs 113.97 crore on Monday.