Advance tax numbers, RBI policy review in focus

A spike in commodity prices, including crude oil, may cap upside on the domestic bourses after a recent sharp sell-off. Foreign funds resorted to heavy selling of India stocks recently, with small-cap and mid-cap stocks taking a beating on concerns over a regulatory crackdown on companies and an ongoing investigation into a telecom corruption scandal.



On Wednesday, 8 December 2010, a television channel said the Intelligence Bureau suspects insider trading in shares of Ruchi Soya, K S Oils and Karuturi Global. According to the report, a report on the Indian stock markets prepared by the Intelligence Bureau (IB) suspects that a market operator Vimal Rathod was accumulating shares of Ruchi Soya, KS Oils, Karuturi Global on behalf of investor C Shivasankaran. The IB has reportedly passed on the information to the Central Bureau of Investigation (CBI) and the market regulator, the Securities and Exchange Board of India (Sebi) for further action.

On Thursday, 9 December 2010, K S Oils denied media reports of involvement of the company and its executives in price manipulation. Ruchi Soya also said on that day that the promoters have already denied reports of price manipulation. Ruchi Soya said promotes have not sold any shares in the current financial year, barring a nominal market sale of 12,255 shares representing 0.008% of the total promoters' stake. Shares of Ruchi Soya had tanked 27% in a single trading session on Wednesday.

Glodyne Technoserve on 9 December 2010 clarified to BSE that the company follows strong corporate governance practice and that there has been no communication received by the company from Sebi or any stock exchanges. The company said it was issuing the clarification in response to reports in a section of the media about price movement of the company's shares.

In its clarification to the stock exchanges denying reports of pricing rigging, IRB Infrastructure Developers also said it had not received any official communication in this regard from the capital market regulator or exchanges or any other authorities. The IRB Infrastructure Developers stock had fallen 9.42% to settle at Rs 190.40 on Wednesday, 8 December 2010.

Capital market regulator the Securities & Exchange Board of India (Sebi), early this month, penalised four companies including real estate developer Ackruti City, Murli Industries and Welspun Corp for colluding with stock brokers to rig their share prices. Late last month, the Central Bureau of Investigations unearthed a bribe-for-loan scandal, involving some officials from state-run banks and two other financial firms.

The Comptroller and Auditor General of India in its 16 November 2010 report said as many as 85 of 122 licenses, which were bundled with bandwidth, were issued in 2008 to companies which didn't have the required capital. It said the cheap allocation of the spectrum in 2008 at prices fixed in 2001 cost the government $38.9 billion in potential revenue. The allegations led to resignation of telecom minister A Raja.

Foreign funds pressed sales of shares worth a net Rs 3505.65 crore during four trading sessions from Monday, 6 December 2010 to Thursday, 9 December 2010, as per the provisional data from the stock exchanges. The net outflow totaled Rs 2024.18 crore so far this month, the stock exchanges data showed.

Analysts say investors are switching funds to developed markets from emerging markets, with many economists revising upwards the growth outlook for US and other developed market countries.

Investors will closely monitor the data on advance tax by top Indian firms for the third advance tax installment due on 15 December 2010. The advance tax figures will provide a cue on Q3 December 2010 corporate earnings.

The Reserve Bank of India (RBI) undertakes a mid-quarter policy review on Thursday, 16 December 2010. RBI governor D Subbarao recently expressed discomfort with the current levels of inflation. "Inflation is coming down but still above the Reserve Bank's tolerance level; growth on the other hand has been encouraging," Subbarao said.

The Organization of Petroleum Producing Countries (Opec) is scheduled to meet in Quito, Ecuador on Saturday, 11 December 2010. The Opec, which accounts for about one third of the world's oil output, is widely expected to keep quotas unchanged. Market players will be closely watching for any commentary from the group on oil prices or global supply and demand. Crude hit a 2-year high above $90 a barrel recently.