Fourth quarter advance tax numbers , monthly inflation data in focus

The figures of advance tax payment by top Indian firms and inflation data for February 2010 will be in focus after strong post-Budget gains on the domestic bourses this month. Performance of global stocks will continue to have their bearing on Indian equities.

Investors will eye figures of advance tax payment by top Indian firms which will give an indication of fourth quarter March 2010 earnings. The fourth and the last installment of advance tax is due on 15 March 2010.

After the latest data showing a surge in industrial production in January 2010, the next major data is of monthly inflation for February 2010 on Monday, 15 March 2010. The headline inflation is seen surging to near 10% mark in February 2010 from a rise of 8.56% in January 2010. Food prices will be keenly watched in coming weeks for the second and third round impacts of last month's fuel price hike.

A rate hike before the next scheduled policy review in April 2010 is, however, unlikely after RBI deputy governor Subir Gokarn recently said it would be premature to take any mid-term policy action. Market men see a 25 basis points hike in the repo and reverse repo rate each by the Reserve Bank of India (RBI) at the April-2010 policy review. Higher interest rates may impact corporate and consumer confidence.

Indian equities will continue to take cues from global stocks. Investors are awaiting further insight into the state of the US economic recovery on Friday, 12 March 2010 when data on US retail sales and consumer sentiment figures will be out. The numbers are expected to indicate how big an appetite Americans have for spending.

Indian stocks witnessed a good post-Budget rally driven by sustained buying by foreign funds since the presentation of the Union Budget 2010-2011 on 26 February 2010. As per data from the stock exchanges, foreign institutional investors (FIIs) bought stocks worth a net Rs 7815.98 crore this month, till 11 March 2010.

The stock market has applauded the Union Budget 2010-2011 due to its thrust on infrastructure development, government's pledge to reduce fiscal deficit over the next three years, a smaller-than-expected 2% hike in excise duties, and reduction in taxes for individuals which will boost disposable income. The Finance Minister has assumed a modest GDP of about 8% and inflation of about 4.5% for 2010-2011.

Going ahead, the key triggers for the stock market are structural reforms such as decontrol of petrol and diesel prices, targeting of food subsidies, and financial sector reforms such as increase in foreign direct investment in insurance sector.