Market geared for weak opening on Japan nuclear worries; RBI policy eyed

Stocks are bracing for a weak start after world markets retreated as fears about the nuclear crisis in Japan deepened. Wall Street closed at its lowest level in 2011 on Wednesday on fears of a nuclear catastrophe in Japan while Asian markets were trading lower on Thursday, 17 March 2011. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 36.50 points at the opening bell. All eyes are on the Reserve Bank of India's (RBI) mid-quarter policy review. As per provisional figures, foreign funds sold shares worth Rs 134.52 crore and domestic funds bought shares worth Rs 326.72 crore on Wednesday, 16 March 2011.



Twelve out of 16 economists polled by Capital Market expect 25 basis points increase in repo rate and reverse repo rate each from the Reserve Bank of India (RBI) at a mid-quarter policy review today, 17 March 2011. The rest 4 economists expect no change in policy rates. The RBI has raised policy rates seven times since March 2010, with a hike of 175 basis points in short-term lending (repo) rate and 225 basis points in short-term borrowing (reverse) repo rate in its bid to arrest inflation.

Asian markets were trading lower on Thursday as fears about the nuclear crisis in Japan deepened. The Nikkei 225 average was down 2.09%. The key benchmark indices in China, South Korea, Indonesia, Hong Kong, Singapore and Taiwan were down by between 0.41% to 2.06%.

Japan struggled to avert a deepening nuclear crisis on Thursday, as military helicopters dumped water on the heavily damaged Fukushima Daiichi nuclear plant in effort to try to cool reactors there. Chief Cabinet Secretary Yukio Edano told reporters at a press conference that the police will join in the efforts to cool the plant by spraying it with water.

Without adequate power to provide continuous cooling, nuclear fuel rods at the plant have been heating up and at least three explosions and two fires over the past week have reportedly led to increased radiation levels around the plant. The plant was damaged last Friday, 11 March 2011, when a 9.0-magnitude earthquake and devastating tsunami struck the northeastern part of the country's main island of Honshu, killing thousands of people. The quake, tsunami and nuclear crisis have plunged the country into its worst crisis since World War II, the government has said.

Meanwhile, global ratings agency Standard & Poor's said on Wednesday Asian economies will continue to grow strongly this year even as Japan struggles with the aftermath of a devastating earthquake and tsunami.

Wall Street suffered severe cut on Wednesday after the European Union's energy chief reportedly said that the situation at a nuclear plant in Japan could get worse. The Dow Jones industrial average lost 242.12 points, or 2.04%, to 11,613.30. The Standard & Poor's 500 Index was down 24.99 points, or 1.95%, to 1,256.88 and the Nasdaq declined 50.51 points, or 1.89%, to 2,616.82.

US crude futures were down 39 cents a barrel or 0.40% to $97.59 a barrel as concern that damage from Japan's earthquake will curb demand for crude outweighed speculation unrest in the Middle East may lead to supply disruptions. Oil prices have come off 29-month highs after a sharp recent rally triggered by unrest in oil rich Middle East and North Africa regions. India imports majority of its crude oil requirements.

Back home, advance tax payments made by top 100 firms based in the country's financial capital --Mumbai reportedly rose by 25% in the Q4 March 2011 over Q4 March 2010, hinting robust earnings. Companies pay advance tax every quarter based on their projected income for the year. Higher advance tax collections reflect more income for firms indicating that companies' sales are growing to meet rising demand.

The wholesale price index (WPI) rose an annual 8.31% in February 2011 on higher fuel and manufactured product prices, government data showed on Monday, 14 March 2011. The figure was above market expectations and it was also higher than the annual rise of 8.23% in January 2011. The annual reading for December 2010 was revised upwards to 9.41% from 8.43%.

The Union Cabinet on Tuesday, 15 March 2011, approved a bill to usher in a national goods and services tax (GST), the final step in the country's most ambitious tax reform before introducing it in parliament. The GST will cut business costs and boost government tax revenue, but will likely miss its April 2012 deadline for implementation due to resistance from several states and the Bharatiya Janata Party.