Market may open lower tracking weak Asian stocks

The key benchmark indices may edge lower in early trade on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate a fall of 7.50 points at the opening bell.

Asian stock markets fell Monday, 20 December 2010 with Korean shares sharply lower as Seoul prepared to hold live firing drills that threatened to escalate tensions with North Korea. The key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.02% to 0.86%.



Sometime Monday, marines were expected to conduct the one-day artillery drills on Yeonpyeong Island, which was shelled by a North Korean artillery barrage last month. The North has warned of a "catastrophe" if South Korea goes ahead with the drills.

US stocks ended flat on Friday, 17 December 2010 as investors shrugged off encouraging economic signs and a tax-cut package expected to lift economic growth.

U.S. jobless claims dipped for a second week, suggesting growth in the labor market, but data on home construction showed that sector remains stressed even as the economy shows signs of a pick up.

Back home, 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 themonetary 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.

Meanwhile, corporate India has reportedly paid 15-20% higher tax for the third quarter of the current financial year. It suggested a strong performance by banking and auto sector. While cement sector had been laggard. State Bank of India paid advance tax of Rs 1850 crore in Q3 December 2010 compared with Rs 1795 crore in Q3 December 2009. HDFC Bank paid Rs 750 crore versus Rs 400 crore, ICICI Bank paid Rs 450 crore versus Rs 301 crore. The tax outgo of HDFC saw a year-on year (y-o-y ) increase of 25% from Rs 320 crore to Rs 400 crore, Punjab National Bank paid Rs 640 crore versus Rs 618 crore, RIL paid Rs 1100 crore in Q3 December 2010 compared with Rs 830 crore in Q3 December 2009. TCS paid Rs 270 crore in Q3 December 2010 compared with Rs 177 crore in Q3 December 2009.

Hindalco Industries paid Rs 200 crore against Rs 148 crore. Tata Power Company paid Rs 58 crore versus Rs 81 crore. Larsen & Toubro paid Rs 270 crore, unchanged from previous year.

M&M paid Rs 236 crore versus Rs 195 crore, Tata Motors paid Rs 220 crore versus Rs 100 crore and Bajaj Auto paid Rs 370 crore in Q3 December 2010 compared with Rs 310 crore in Q3 December 2009. FMCG major Hindustan Lever paid Rs 225 crore, marking a yo-y increase of Rs 45 crore, an increase of over 25%. Petroleum major HPCL recorded a lower tax outgo, Rs 29 crore against Rs 48 crore, a 39% decline.

Punjab and Sind Bank's Rs 480-crore initial public offer (IPO) was subscribed 47.20 times by 16:00 IST on the last day of bidding for the issue today, 16 December 2010.

As per provisional figures on NSE, foreign funds sold shares worth Rs 316.79 crore while domestic funds bought shares wroth Rs 96.03 crore on Thursday, 16 December 2010.

The stock market had remained close on Friday, 17 December 2010, on account of Moharum.