Advance tax numbers, RBI policy review in focus

Data on advance tax payment for the second installment of 15 September and macro economic data will be in focus next week. Another major event is a mid-term monetary policy review by the central bank on Thursday, 16 September 2010.



The second installment of advance tax payment which falls due on 15 September 2010, will give a hint about Q2 September 2010 corporate results. As per market speculation, the total advance tax payment is pegged at Rs 50000 crore. Stock-specific activity is likely based on the advance tax figures of individual firms.

A section of the market is concerned that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. This includes a large initial public offer (IPO) from Coal India in October 2010. The state-run firm expects to raise $3 billion (about Rs 14000 crore) from the IPO. The government is divesting a 10% stake in Coal India through the proposed IPO.

On the macro front, data on industrial production for July 2010 will be out on Friday, 10 September 2010, when the stock market remains shut on account of Ramzan Id. Industrial output rose 7.1% in June 2010, compared with revised 11.3% rise in May 2010.

The government will unveil inflation data for August 2010 on Tuesday, 14 September 2010. The wholesale price index (WPI) rose an annual 9.97% in July 2010. The annual food inflation rate fell to 10.29% in July 2010 from 14.6% rise in June 2010, with prices of vegetables and sugar falling on the month. Manufacturing inflation, which the RBI uses as a proxy for assessing demand, cooled to 6.15% from 6.66% in June 2010. On the flip side, the headline inflation for May 2010 was revised upwards to 11.14% from 10.16%.

The Reserve Bank of India (RBI) has raised its repo rate by 100 basis points (bps) and the reverse repo rate by 125 bps in the current rate tightening cycle. The repo rate is now 4.5%, the reverse repo rate 5.75% and the cash reserve ratio (CRR) 6%.

The recent turnaround of the Indian economy is likely to translate into sustained capital expenditure (capex) program of India Inc. This augurs well for the medium-term economic growth. High capacity utilisation in some of the key industries further corroborates likelihood of a capex upsurge.

On the global front, investors are looking ahead to August 2010 trade data from China on Friday, 10 September 2010. As per the market buzz, China will announce a big trade surplus for the month.