Market may remain volatile on mixed Asian stocks; food inflation data eyed

The market may remain volatile on mixed Asian stocks. Closer home, the government will unveil data on some wholesale price indices for the year through 6 March 2010 viz. the food price index, the primary articles index and the fuel price index at 12:00 IST.

Equities have witnessed a strong 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 9225.19 crore this month, till 16 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.

The several companies have paid a higher tax this quarter according to the preliminary data, indicating better fourth quarter results. Reliance Industries has paid Rs 770 crore as advance tax for the March quarter compared with Rs 365 crore a year ago. Infosys' tax outgo has doubled to Rs 250 crore from Rs 125 crore. Tata Consultancy Services paid Rs 178 crore, compared from Rs 53 crore earlier. State-run Union Bank of India paid Rs 185 crore compared with Rs 253 crore a year ago. ICICI Bank's Q3 advance tax stood at Rs 350 crore versus Rs 250 crore a year ago. Asian Paints paid Rs 60 crore, versus Rs 43 crore year earlier.

State Bank of India has paid Rs 1857 crore verses Rs 1810. HDFC paid Rs 280 crore, unchanged from a year earlier. Tata Motors paid Rs 115 crore versus Nil a year ago. Bank of Baroda paid Rs 300 crore verses Rs 280. Zee Entertainment Enterprises paid Rs 97 crore versus Rs 109. Tata Steel paid Rs 513 crore versus Rs 406 crore. L&T paid Rs 270 crore versus Rs 275 crore. Bajaj Auto paid Rs 177 crore versus Rs 60 crore. M&M paid Rs 235 crore versus nil a year earlier.

Cement maker ACC paid Rs 330 crore compared to Rs 340 crore a year ago. Ambuja Cement paid Rs 120 crore, compared with Rs 125 crore a year ago. Aditya Birla Group firm Grasim Industries paid Rs 216 crore as advance tax in the period under review, as compared to Rs 65 crore a year ago. Life Insurance Corp of India (LIC) has paid Rs 864 crore as advance tax for the March quarter, compared with Rs 810 crore year ago.

On the macro front, the headline inflation topped expectations and came within touching distance of double digits in February 2010, making a rate increase by the Reserve Bank all but inevitable at its scheduled April 2010 policy review. Annual wholesale price inflation accelerated to 9.89% in February, the highest since October 2008 and well above the Reserve Bank of India's end-March projection of 8.5% and the 8.56% January reading.

The inflation data comes on the heels of a 16.7% annual jump in industrial output in January, with the unexpectedly strong economic pickup also backing the case for the central bank to raise policy rates by at least 25 basis points.

With growth firmly on track and inflation rising beyond its comfort zone, the Reserve Bank of India (RBI) should consider carefully returning to normal monetary policy, deputy chairman of the Planning Commission Montek Singh Ahluwalia said on Wednesday.

A core group of central ministers and state chief ministers will reportedly work out a long-term strategy for sustained agricultural growth to strengthen the government's efforts to tame soaring food prices and address concerns over food security. The core group, set up by the prime minister on Monday, comprises finance minister Pranab Mukherjee, agricultural minister Sharad Pawar and chief ministers of 10 key states.

Meanwhile, the United States and India signed an agreement on Wednesday to strengthen trade and investment ties, following through on a pledge leaders of the two countries made last year

Asian shares were mixed on Thursday, with shipbuilders trading down in South Korea on news of an order cancellation for Hyundai Heavy. The key benchmark indices in Hong Kong, japan, and Singapore fell by between 0.01% to 0.21%. But, the key benchmark indices in China, Indonesia, South Korea and Taiwan rose by between 0.04% to 0.4%.

The US markets moved higher for the third straight session & hit afresh 52-week high along the way on Wednesday, 17 March 2010. Renewed pledge from the Fed for low rates and a drop in inflation at the producer level helped fuel the market's momentum. Producer prices for February fell 0.6%, which was a sharper drop than expected, but core prices climbed a tame 0.1%, as expected.

The Dow Jones Industrial Average closed 47.69 points or 0.45% higher at 10,733.67. The Nasdaq Composite ended at 2,389.09, up 11.08 points or 0.47% and the S&P 500 was at 1,166.21, up 6.75 points or 0.58%.

Close home, the key benchmark indices attained their highest closing level in two months on Wednesday, 17 March 2010 as world stocks rose after the US Fed held benchmark rates near zero and maintained its pledge to keep them low for an extended period. The BSE 30-share Sensex rose 106.90 points or 0.61% to 17,490.08 its highest since 18 January 2010 on Wednesday.

As per provisional figure on NSE, foreign funds bought shares worth Rs 815.94 crore and domestic funds sold shares worth Rs 297.72 crore on Wednesday.