Market likely to remain subdued on political uncertainties, rising crude prices

The market is likely to exhibit weakness in the forthcoming week on rising political uncertainties and a spurt in crude oil prices. Activity of the domestic and foreign funds will determine the market trend. Also impact of the massive earthquake and tsunami, that struck the World's third largest economy - Japan on 11 March 2011, on the global economy and the developments from the Middle East will be closely watched.



A whole host of domestic and global factors will influence the market. At home, the UPA government faces fresh allegations of corruption with the opposition demanding the resignation of Prime Minister Manmohan Singh after a wikileaks cable showed bribes had been given for votes during the Indo-US nuclear treaty. The ruling government, which is already burdened by corruption charges, however, reportedly denied all such allegations.

The latest corruption allegations against the government put a shadow on import bills. The Finance Bill, which completes the budgetary exercise, needs to be passed in parliament. In view of the elections in five states (West Bengal, Assam, Kerala, Tamil Nadu and Puducherry), the government has curtailed the Budget Session of Parliament, which will conclude on 25 March 2011.

The Union cabinet has already approved the Constitutional Amendment Bill to roll out the Goods and Services Tax (GST), hoping that a debate in Parliament will help build consensus on this crucial reform. The GST seeks to replace multiple indirect taxes, such as the central excise duty and services tax, and state taxes including value added tax, entry tax and purchase tax, with a neat single levy.

Rising interest rates and high inflation continued to weigh on stock prices for the second straight week ended Friday, 18 March 2011.

On the global front, the investors continue to eye whether Japan is able to avoid a nuclear catastrophe. Also uncertainty prevailing on the crisis in the Middle East and North Africa region (MENA) and global commodity prices will dictate the trend.

Soaring global crude oil price is also a cause of concern. With India importing 70% of its oil requirements, surging oil prices stoked concerns about faster inflation and higher interest rates. US crude futures were up $0.57 a barrel or 0.56% to $101.99 a barrel led by ongoing tensions in the oil-rich Gulf region and the impact from Japan's nuclear crisis.

Corporate earnings will also be in focus as Q4 March 2011 draws towards a close. As per reports, companies across all sectors have paid significantly higher advance taxes in Q4 March 2011 over the year-ago period. Companies pay advance tax in four installments in a year based on their projected profits for the year.

Interest of foreign funds has been waning for Indian equities. According to a foreign fund manager's survey India featured among the 'least favoured' investment destinations. Fund managers have reduced their allocations towards emerging markets, including India, for the fourth successive month to reach the lowest level in two years, the survey said.