Market may open in the green

The market may open higher if trading of S&P CNX Nifty futures on the Singapore stock exchange is of any indication. It indicate a gain of 17.50 points at the opening bell. Asian stocks were mixed.

Asian stock markets were mixed on Tuesday, 28 December 2010 as investors looked past China's rate hikes and stayed on the sidelines ahead of the release of key U.S. home price data later in the day. The key benchmark indices in China, Hong Kong, Japan and Taiwan fell by between 0.12% to 0.8%. The key benchmark indices in Indonesia, South Korea and Singapore rose by between 0.16% to 0.82%.



US stocks were little changed on Monday, 27 December 2010 as investors shrugged off China's interest rate increases over the weekend. Beijing aims to tame inflation, which jumped to 5.1% in November, a 28-month high.

Back home, 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 Reserve Bank of India , 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 Reserve Bank of India, 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 246.31 crore and domestic funds sold shares worth Rs 113.89 crore on Monday.