Market may open higher on mostly firm Asian stocks; food inflation data eyed

The key benchmark indices may extend Wednesday (29 December 2010)'s more than 1% gains tracking mostly higher Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a gain of 13.50 points at the opening bell. On the macro front, the government will unveil data on some wholesale price indices for the year through 18 December 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.



Expiry of the near-month December 2010 futures & options (F&O) contracts may cause volatility. The near-month December 2010 derivatives contracts expire today, 30 December 2010.

Most Asian stocks were slightly higher Thursday, 30 December 2010 as fewer investors participated in the market ahead of the New Year holiday. The key benchmark indices in Hong Kong, Indonesia, Singapore, South Korea and Taiwan rose by between 0.04% to 0.4%.

But, Japan's Nikkei Average fell 1.24%. The Japanese stock market will be closed in the afternoon session Thursday. It will resume trading on 4 January 2010.

China's Shanghai Composite declined 0.47%. China's manufacturing activity continued to expand in December, but the pace of growth slowed to a three-month low, according to the outcome of a survey by HSBC, released Thursday. China's purchasing managers' index for December came in at 54.4, above the threshold of 50 that separates expansion from contraction, but below November's reading of 55.3.

U.S. stocks advanced in thin trade on Wednesday, 29 December 2010 lifted by investor optimism about the economy in 2011.

Back home, 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 RBIstatement 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 547.58 crore and domestic funds sold shares worth Rs 170.34 crore on Wednesday.