Dull trend may persist

Inflation is taxation without legislation. - Milton Friedman.

Onions and other veggies are making headlines for hitting the household budgets and adding to the UPA’s woes. Food inflation, which seemed to be softening, has surged to 12%. Inflation could spike further up if the Government goes ahead with a hike in diesel and LPG. Crude oil is hovering around $91.51, amid optimism that the US economy is slowly getting back on track.



Meanwhile, the Indian markets seem to be suffering from the holiday syndrome, completely lacking any sort of excitement. December has been utterly forgettable for India even as "western" markets are enjoying a Santa Clause rally.

FIIs and other influential institutions have been on the sidelines, leading to a listless trading and light volumes. We expect a slightly lower start and rangebound movement for the key indices. We expect the Nifty to trade in a range of 5960-6020, and breakout on either side to set direction in the short term.

Next week, there could be some action owing to the F&O expiry, but don’t bet on any significant progress. January will be interesting as markets react to the latest report card from India Inc. and the RBI review. A whole host of fresh economic data points from around the globe should also be watched carefully.

Shares of Ravi Kumar Distilleries Ltd. will be listed today.

Shares of Kirloskar Oil Engines Ltd. will also make their debut following a Scheme of Arrangement.

FIIs were net sellers of Rs 1.43bn in the cash segment on Thursday, according to the provisional NSE data. The domestic institutional institutions were net sellers at Rs 886.3mn. FIIs were net buyers of Rs 1.09bn in the F&O segment on the same day. The foreign funds were net sellers of Rs 237mn in the cash segment on Wednesday, according to the SEBI web site.

IT services companies might be under some pressure after the US Senate passed a bill that is expected to increase their work visa costs and tax outgo in the crucial market. Patni computer could be in action amid reports that a Carlyle-led consortium is the frontrunner for picking up a majority stake in the IT firm. Max India is another stock to keep an eye on as Temasek has picked up a 3% stake in the company.

Indian Hotels might attract some attention after its Board approved preferential allotment of warrants and shares to Tata Sons. Aksh Optifibre is likely to be in the spotlight amid reports that the Bank of New York Mellon has sought its closure on the back of an alleged default in bond repayment. Retail shares could gain amid reports that the Government has resumed talks on allowing FDI in multi-brand retail.

SBI and other banks will be in focus as the RBI has formalised the increase in standard provisioning on the so-called "teaser loans". Banks will have to set aside a small chunk of their earnings for these teaser loans.

Asian Markets on Friday:

Asian stock indices were trading mostly in the red in early morning trade on Friday, with the regional benchmark falling for the first time in four days, as lower metal prices hurt mining companies and Japanese exporters fell after the yen gained yesterday.

Tokyo financial markets were closed yesterday.

The MSCI Asia Pacific Index fell 0.4% to 135.06 as of 11:22 a.m. in Tokyo, with more than two stocks declining for each that advanced.

The gauge is headed for gains of 1% this week and 5% this month, as reports showed that US GDP expanded faster than estimated and the country’s retail sales increased last week, bolstering confidence in a global economic recovery.

The MSCI Asia Pacific Index climbed to a two-and-a-half-year intraday high on Dec. 14, as optimism about the prospects of the US economy partly offset concerns over Europe’s debt crisis and China’s efforts to slow its economy.

The Asia Pacific gauge fell 0.6% last month, the first decline in three months, amid concern that China will intensify efforts to curb inflation, speculation Europe will fail to contain the region’s sovereign-debt crisis from spreading and as tensions in the Korean peninsula escalated.

The Nikkei in Tokyo was down 0.7% at 10,272 while the S&P/ASX 200 index in Sydney was up 0.5% at 4,776. The Hang Seng in Hong Kong was down ~0.4% at 22,807. The Shanghai SE Composite index in China was down 1.1% at 2,822.

South Korea’s Kospi Index was down ~0.3% at 2,031. The Taiex in Taiwan was down ~0.2% at 8,878 while the Straits Times index in Singapore rose ~0.2% at 3,143.

BHP Billiton and Rio Tinto declined after copper futures for March delivery fell 0.4% yesterday in New York. The London Metal Exchange Index of six metals including, copper and aluminum slipped 0.8% yesterday, dropping for a second consecutive day.

Shares of Nissan, Mazda Motor and Canon fell in Tokyo after the yen advanced against the US dollar on Thursday. The dollar had fallen to as low as 82.86 against the yen yesterday in New York, the weakest level since Dec. 14.

The euro slid to as low as 108.46 against the Japanese currency yesterday, near the lowest level this month.

Today however, the yen fell against all its major peers amid growing risk tolerance. The euro gained for the first time in eight days against Japan’s currency before Dec. 29.

Advantest shares dropped after Verigy Ltd., a maker of testing equipment for semiconductor manufacturers, said that Advantest had raised its takeover offer by 23%. Advantest said it amended its offer, without providing details.

In Seoul, Hyundai Merchant Marine shares plunged, the biggest percentage drop on the MSCI Asia Pacific Index. Hyundai Elevator Co. agreed to buy 1.8 million new shares in the shipping line for 32,000 won each, according to a regulatory filing.

US Markets on Thursday:

US stocks closed mixed on Thursday with the blue chip Dow Jones Industrial Average posting a fresh two-year high while the broader market declined. A mixed set of economic statistics prompted investors to remain cautious ahead of the long Christmas weekend.

The Dow rose 14 points, or 0.12%, to 11573.49, its highest closing level since August 2008.

The Nasdaq Composite index fell 5.88, or 0.22%, to 2665.60. The Standard & Poor’s 500-stock index shed 2.07, or 0.16%, to 1256.77.

Financials led fell in a small pullback from the sector’s Wednesday rally while energy and materials stocks rose.

Thursday’s stock moves came on thin volume as some traders decided to take a longer weekend. The US stock market will be closed on Friday.

Less than 3 billion shares changed hands in New York Stock Exchange Composite volume during the session, well below the month’s average of 4.8 billion shares a day.

Thursday marked the conclusion of a positive week for stocks, with the Dow up 0.71% on the week, the S&P 500 up 1% and the Nasdaq up 0.9%, adding to their gains for the month.

It was the fourth straight week of gains for the Dow and the S&P 500, and the fifth for the Nasdaq.

With one week left to December, the Dow is up 5.2% for the month, while the S&P 500 is up 6.5% and the Nasdaq is up 6.7%. US stocks are still on track to post double-digit increases for the year.

On Wednesday, stocks ended at fresh two-year highs as oil prices topped $90 a barrel.

Oil for February delivery jumped $1.03, or 1%, to settle at a fresh two-year high of $91.51 a barrel, a day after crude topped $90 a barrel for the first time since 2008.

Gas prices surpassed the milestone $3 mark for the first time since Oct. 17, 2008, as the national average compiled by motorist group AAA reached $3.013 a gallon. Gas prices have risen more than 4% from a month ago, and are nearly 16% higher than the a year ago.

The dollar lost ground against the euro, Japanese yen and British pound.

Gold futures for February delivery fell $8.40 to settle at $1,380.50 an ounce.

The price on the benchmark 10-year U.S. Treasury was slightly lower, pushing the yield up to 3.39%.

Both bonds and commodity markets had a half-day on Thursday, and are closed on Friday.

Reports showed jobless claims barely budging, new home sales rising slightly and personal income and spending ticking higher.

Before the opening bell, the Commerce Department reported that personal income rose 0.3% and personal spending rose 0.4% in November. The results were mixed, compared to expectations. A consensus of economists expected the report to show that income rose by 0.2% in November, and spending to have risen 0.5% during the month.

Meanwhile, the Department of Labor announced that initial jobless claims fell 3,000 to 420,000 in the week ended Dec. 18. Claims were expected to have edged up to 424,000.

The Commerce Department's report on November durable goods orders declined 1.3% in November, a bit more than the expected decline of 1.1%.

The new home sales index for November from the Census Bureau rose 5.5% to a seasonally adjusted annual rate of 290,000, from a 275,000 in the previous month. The index was expected to have risen to a rate of 300,000 units. But sales are still off 21.2% from a year ago, indicating the recovery is still sluggish.

The University of Michigan's final reading on consumer sentiment in December ticked up to 74.5 from 74.2 in the previous month, slightly missing the 74.8 reading economists had expected.

Bed Bath & Beyond climbed 5.1%. The household furnishings retailer posted a 25% increase in fiscal third-quarter earnings, beating its guidance and raising its expectations for the remainder of the year.

Jo-Ann Stores said that it was being acquired by private-equity firm Leonard Green & Partners for $1.6 billion, or $61 per share in cash. The stock surged 32%.

European Markets on Thursday:

European stocks posted modest gains amid thin volume on Thursday, the last full trading session before the Christmas holiday. Shares of Allied Irish Banks plunged as the Irish government effectively took control of the ailing financial group.

The Stoxx Europe 600 index added 0.1% to close at 281.76, its highest finish in more than two years, after finishing on Wednesday with a 0.1% gain. The index is up 1.9% for the week to date.

US stocks were mixed as investors digested a heavy slate of economic data.

In London, the FTSE 100 index touched the 6,000 mark for the first time since June 2008 to set a session high at 6,000.55. The index finished 0.2% higher at 5,996.07.

The French CAC 40 index fell 0.2% to 3,911.32. In Germany, the DAX 30 index fell 0.1% to 7,057.69.

Many European markets will be closed on Friday, with London markets closing at midday. US markets will also remain shut on Friday.

Shares of AIB fell 18.8% after the government won a request by the Irish High Court to approve a 3.7 billion euro ($5 billion) cash injection. The government, which already has a 19% stake in AIB, will now hold more than 92% of the bank.

AIB shares will be delisted from the main Irish exchange and now list on the Enterprise Securities Market, which will allow shareholders to maintain access to a public facility for those shares. Trading in AIB will also be canceled on London’s main exchange. Read more about AIB.

The Ireland ISEQ index fell 0.3% to 2,878.22.