Market may open higher extending last three days gains

The key benchmark indices may edge higher in early trade extending last three days gains on modestly higher Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a gain of 5.50 points at the opening bell.

Asian shares rose modestly in early trading Wednesday, 22 December 2010 after a $6.3 billion banking deal sent Wall Street to new two-year highs. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.04% to 0.46%. But, Indonesia's Jakarta Composite fell 0.05%.



Japan said its exports in November rose 9.1 percent from a year earlier. The Ministry of Finance says the value of Japanese exports expanded to 5.4 trillion yen ($64.4 billion). It said it was the 12th consecutive monthly growth.

Trading was subdued ahead of Christmas holidays later this week,

US stocks rose on Tuesday 21 December 2010 as a big banking deal raise hopes that more acquisitions could be on the way. Toronto-Dominion Bank said it is buying Chrysler Financial, the automaker's old lending arm, from Cerberus Capital Management LP for $6.3 billion.

Back home, advance tax payments 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.

The Reserve Bank of India (RBI) on Thursday, 16 December 2010 announced measures to ease liquidity crunch in the banking system while keeping the key policy rates unchanged after a mid-quarter policy review. 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 endeavour 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 Reserve Bank of India , it said. The liquidity easing measures will help stabilise interest rates in the overnight inter-bank market closer to the operative policy rate of the Reserve Bank of India, it said.

As per provisional figures on NSE, foreign funds sold shares worth Rs 34.79 crore while domestic funds bought shares worth Rs 373.67 crore on Tuesday.