Market may open lower on weak Asian stocks

The key benchmark indices may open lower, tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a decline of 7.50 points at the opening bell.

Foreign funds sold shares worth Rs 143.10 crore and domestic funds sold shares worth Rs 88.63 crore on Thursday, 23 December 2010, as per provisional data from the stock exchanges. Foreign funds have sold shares worth a net Rs 4277.06 crore so far this month, as per data from the stock exchanges. Domestic funds have bought shares worth a net Rs 1334.31 crore this month so far.



Asian stocks declined on Friday, 24 December 2010, on continuing financial concerns in Europe. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan fell by between 0.19% to 0.86%.

Fitch Ratings cut Portugal's credit rating on Thursday, dealing another blow to the country as it confronts the euro zone's sovereign debt crisis. Fitch downgraded Portugal's sovereign debt credit rating due to concerns about the government's slow budget deficit reduction, deteriorating near-term economic outlook, and a "much more difficult" financing environment for the Portuguese government and its banks.

Fitch Ratings also downgraded Hungary's sovereign credit rating by one notch to just above junk status on Thursday, saying it will cut further unless the new government implements credible medium-term fiscal consolidation measures. The move, which means Hungary is now at the lowest possible investment grade at all three major rating agencies, came the same day as parliament passed the 2011 budget bill.

US stocks racked up a fourth straight week of gains on Thursday, 23 December 2010, as investors expected optimism about the economic recovery to support equities through year-end. The latest economic data though was mixed. Consumer sentiment rose in December to its highest level since June, and demand for long-lasting manufactured goods surged. First-time claims for jobless benefits edged down, but a rise in new home sales in November came in below expectations.

Oil surged above $91 a barrel to its highest level in more than two years on Thursday, as OPEC member Libya's apparent lack of concern over prices prompted some analysts to call for a new year's run at $100.

Back home, the finance ministry has reportedly shot off a fresh missive to the labour ministry asking it to invest a part of the Rs 5 lakh crore corpus of the employees' provident fund savings in stock markets. The finance ministry had earlier proposed that the EPF organisation could set aside 15% of funds for investments in the stock market and need not seek a nod from the Central Board of Trustees, or CBT, the policy making body of the employees' provident fund organisation, or EPFO.

Meanwhile, a ministerial panel may meet by end-December on diesel prices, Oil Secretary S. Sundareshan said on Tuesday, 21 December 2010. "The agenda of the meeting will be finalised a day before the meeting," Sundareshan told reporters. If the price of diesel is hiked, it will offset an expected decline in wholesale price inflation arising from a favourable base effect. Diesel is a key transportation fuel and any hike in diesel prices directly adds to inflationary pressure.

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), last week, 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.

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.