Market may open flat to slightly higher

The key benchmark indices may open flat to slightly higher tracking marginally higher Asian stocks. The turnover may remain low as foreign fund activity remains sluggish in holiday thinned week. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a flat opening.



Expiry of the near-month December 2010 futures & options (F&O) contracts may cause volatility this week, the last trading week of calendar 2010. The near-month December 2010 derivatives contracts expire on Thursday, 30 December 2010.

Asian stock markets drifted in a narrow range Wednesday, 29 December 2010 and their gains were limited on disappointing U.S. economic data. The key benchmark indices in Hong Kong, Indonesia, Japan, Singapore and South Korea rose by between 0.17% to 0.57%. But the key benchmark indices in Taiwan and China fell by between 0.09% to 0.19%.

US markets rose in light trading on Tuesday, 2 December 2010 extending December's rally, as cold weather in the Northeast lifted oil prices and energy shares.

U.S. consumer confidence unexpectedly deteriorated in December, while prices of single-family homes fell almost double the expected pace in October, tempering growing optimism on the economy's recovery.

Back home, India, the world's biggest producer and consumer of pulses, has extended ban on pulses exports until further order, the farm minister, Sharad Pawar, said on Tuesday, as it battles to rein in high food prices. The government had in June 2006 banned exports of pulses, which has a weightage of 0.72% in the wholesale price index.

The food price index rose 12.13% while the fuel price index climbed 10.74% in the year to 11 December 2010, the latest government data showed. In the prior week, annual food and fuel inflation stood at 9.46% and 10.67% respectively. The primary articles price index was up 15.35% in the latest week compared with an annual rise of 13.25% a week earlier.

The Reserve Bank of India (RBI) announced measures to ease liquidity crunch in the banking system while keeping the key policy rates unchanged at a mid-quarter policy review on 16 December 2010. The RBI reduced the statutory liquidity ratio (SLR) of scheduled commercial banks (SCBs) from 25% of net demand and time liabilities (NDTL) to 24%, with effect from 18 December 2010. The central bank also said it will conduct open market operation (OMO) auctions for purchase of government securities for an aggregate amount of Rs 48000 crore in the next one month. These two measures are expected to inject liquidity on an enduring basis of the order of Rs 48000 crore, the RBI said after the mid-quarter policy review.

The RBI said the underlying growth momentum of the Indian economy remains strong. Even as inflation has moderated, it remains significantly above the comfort level of the RBI, the RBI said in a statement. Moreover, risks to inflation remain on the upside, both from domestic demand and higher global commodity prices, the RBI said. There is, therefore, a need for continued vigilance on the inflation front against the build-up of demand side pressures. The RBI had earlier projected 5.5% inflation by March 2011.

A major challenge for the RBI in the recent period has been liquidity management. It is the RBI's endeavor to alleviate the liquidity pressure in a manner consistent with the monetary policy stance of containing inflation and anchoring inflationary expectations, the RBI statement said.

The RBI said its latest measures will release sizable primary liquidity into the system. These measures will reduce the liquidity deficit in the system close to the comfort zone of the RBI, it said. The liquidity easing measures will help stabilize interest rates in the overnight inter-bank market closer to the operative policy rate of the RBI, it said.

Meanwhile, the combined advance tax payment by top 100 corporate taxpayers rose 18.7% to Rs 27,531 crore in Q3 December 2010 over Q3 December 2009, indicating better corporate performance in the third quarter this year. Advance tax is paid in four installments in June, September, December and March and is based on taxpayers' projected earnings, thus giving an indication of industry's performance in the months to come.

As per provisional figures on NSE, foreign funds bought shares worth Rs 109.03 crore and domestic funds sold shares worth Rs 265.3 crore on Tuesday.