Market seen opening lower on political uncertainties

The market is likely to open lower on rising uncertainty between the fate of the DMK and the UPA alliance. Global cues were mixed-to-negative with Asian markets trading slightly higher today, 8 March 2011 while US markets ended lower on Monday, 7 March 2011. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 22.50 points at the opening bell. As per provisional figures, foreign funds sold shares worth Rs 82.24 crore and domestic funds bought shares worth Rs 45.57 crore on Monday, 7 March 2011



The Dravida Munnetra Kazhagam (DMK) on Monday put on hold the resignation of its six ministers from the UPA government in a dramatic new turn with the party and Congress engaged in hectic negotiations to sort out their seat-sharing problems in Tamil Nadu.

The Insurance Regulatory and Development Authority (Irda) reportedly plans to permit insurers to trade in equity futures and options contracts which will help the companies protect returns from equity-linked products against sharp stock market declines. The move to allow insurance companies to trade in futures and options will boost trading volumes in the equity derivatives market, but only gradually.

India's south-west monsoon is likely to be normal for the second straight year in 2011, weather officials said on Monday, 7 March 2011, raising hopes of higher farm output that could help the government tame high food prices.

The Central Statistical Organisation (CSO) will unveil the industrial production data for January 2011 on Friday, 11 March 2011. Industrial production growth eased to a 22-month low of 1.6% in December 2010 from an upwardly revised growth of 3.6% recorded in November 2010.

High crude oil prices remain a cause for concern for India which imports majority of its crude oil requirements. US crude futures were down $0.32 a barrel or 0.30% to $105.12 a barrel. Oil futures climbed as fighting in Libya raged on, adding to concern popular unrest will spread to other, nearby oil-producing states. Over the weekend, heavy fighting continued in Libya, with pro-government forces battling protesters for control of key towns and ports.

Oil prices have seen big gains recently as unrest gripped the Middle East and North Africa, spreading from Tunisia to the surrounding areas, including Libya. There are concerns that a pro-democracy movement could spread to large-scale oil producer Saudi Arabia. Closer home, the Reserve Bank of India is expected to raise rates by 25 basis points at its mid-quarter policy review on 17 March 2011 as headline inflation remains high.

Most Asian stocks recovered after a weak or subdued start on Tuesday, 8 March 2011, with investors looking for some bargain hunting after recent sharp losses. The key benchmark indices in Hong Kong, Japan, South Korea, Taiwan, China and Singapore rose by between 0.06% to 0.98%. But Indonesia's Jakarta Composite fell 0.13%.

In economic news, Japan posted a current account surplus of 461.9 billion yen in January 2011, down sharply from the surplus of 1.195 trillion yen in December 2010, the Ministry of Finance said on Tuesday.

US stocks fell on Monday, 7 March 2011, as investors continued to fret over the potential impact of rising oil prices amid more turmoil in Libya, while the technology sector was also hurt by an analyst downgrade. The Dow Jones Industrial Average dropped 79.85 points, or 0.66%, to 12090.03. The Standard & Poor's 500-stock index shed 11.02, or 0.83%, to 1310.13 and the Nasdaq Composite got hit even harder, down 39.04, or 1.40%, to 2745.63.

Back home, India dedicated equity funds attracted $50 million in net new cash in the week ended 2 March 2011, latest data from global fund tracker EPFR Global showed.

Global rating firm Moody's on Monday, 7 March 2011, said India's recent budget plan for fiscal 2012 is "credit positive" for the Indian government's current Baa3 rating with a stable outlook. The budget projects a deficit of 4.9% of GDP, excluding privatization revenues, down from the 5.3% estimated for fiscal 2011. "This will sustain a faster de-leveraging of government debt than originally forecast, and is credit positive for the Indian government," Moody's said.

Among the positive factors, Moody's cited a liberalization of domestic petroleum prices and one-off price increases in kerosene and liquefied petroleum gas which support the profitability of oil marketing companies, thereby limiting the need to lend to public-sector oil companies. "Nevertheless, high oil prices still pose a risk to the projected budget deficit given the absence of a full or much greater pass through of global oil prices to end users," the rating agency said.

The food price index rose 10.39% and the fuel price index climbed 12.56% in the year to 19 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 11.49% and 12.14%. The primary articles price index was up 14.85% compared with an annual rise of 15.77% a week earlier.

India's services sector expanded in February at its fastest pace in seven months, helped by a steady expansion of new business, even as input price pressures intensified, a survey showed on Thursday. The HSBC Markit Business Activity Index based on a survey of around 400 companies, rose to 60.2 in February 2011 from 58.1 in January 2011, staying above the 50 mark that separates growth from contraction for the 22nd consecutive month. The PMI'snew business sub-index, at 59.6, recorded its strongest growth since June as market conditions improved, and developed economies recovered. The degree of positive sentiment in the business expectations sub-index was the strongest in 16 months.

The manufacturing sector expanded at its fastest clip in three months in February 2011 as more new orders poured in, but input prices rose at a record pace, a survey showed on Tuesday, 1 March 2011. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 Indian companies, rose to 57.9 in February from 56.8 in January. This was the 23rd consecutive month the key index of manufacturing in Asia's third largest economy has been above the 50 mark that divides growth from contraction.