Market may extend recent gains on firm Asian stocks

The market may extend recent strong gains on firm Asian stocks buoyed after an agreement was reached by the European leaders to help contain the region's two-year debt crisis. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 83.50 points at the opening bell.

Key benchmark indices edged higher to attain 11-1/2-week closing highs during the auspicious Muhurat trading session on Wednesday, 26 October 2011, on hopes that a much-awaited summit of euro-zone leaders will present a convincing plan to handle the 2-year old euro-zone debt crisis. The BSE Sensex rose 33.97 points or 0.2% to settle at 17,288.83, its highest closing level since 5 August 2011.



The market remained closed on Thursday, 27 October 2011, on account of Diwali, the biggest festival in India.

Stock-specific activity may dominate trade in the near-term as earnings flow in. Investors will closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.

Indian Hotels unveils Q2 results today, 28 October 2011. Maruti Suzuki and LIC Housing Finance report Q2 results on Saturday, 29 October 2011. ICICI Bank, Wipro, Hindustan Unilever, Dabur India, Colgate Palmolive (India), Bank of Baroda, NMDC and BPCL unveil Q2 results on 31 October 2011

Cement majors ACC and Ambuja Cements, Punjab National Bank, HPCL and Aditya Birla Nuvo unveil quarterly results on 1 November 2011. Sun TV Network, Ashok Leyland and TVS Motor report Q2 results on 3 November 2011. ONGC, Bharti Airtel and GlaxoSmithKline Pharmaceuticals unveil quarterly results on 4 November 2011.

Infrastructure Development Finance Company and ABB unveil results on 8 November 2011. Ranbaxy Laboratories, Indian Oil Corporation, GMR Infrastructure and Power Finance Corporation unveil quarterly results on 9 November 2011. Tata Steel, Hindalco and Mahindra Satyam unveil Q2 results on 10 November 2011. Jet Airways (India) and Tata Chemicals unveil Q2 results on 11 November 2011. Coal India and Shipping Corporation of India report Q2 results on 12 November 2011. Tata Motors, Mahindra & Mahindra and India Cements unveil Q2 results on 14 November 2011. Tata Power unveils Q2 results on 15 November 2011.

RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on Tuesday, 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably. RBI said that economic growth is moderating on account of the cumulative impact of past monetary policy actions as well as some other factors.

The central bank said that the likelihood of a rate action in the December mid-quarter review is relatively low. Beyond that, if the inflation trajectory conforms to projections, further rate hikes may not be warranted, the central bank said in a statement. However, as always, actions will depend on evolving macroeconomic conditions, it added.

While the impact of past monetary actions is still unfolding, it is necessary to persist with the anti-inflationary stance, RBI said. The stance of the monetary policy is intended to maintain an interest rate environment to contain inflation and anchor inflation expectations. The stance of the monetary policy is also intended to stimulate investment activity to support raising the trend growth. The stance of the monetary policy is also intended manage liquidity to ensure that it remains in moderate deficit, consistent with effective monetary transmission.

RBI said that several factors--structural imbalances in agriculture, infrastructure capacity bottlenecks and distorted administered prices of several key commodities and the pace of fiscal consolidation--have combined to keep medium-term inflation risks in the economy high. These risks can only be mitigated by concerted policy actions on several fronts, RBI said. In the absence of progress on these, over the medium term, RBI's monetary policy stance will have to take into account the risks of inflation surging in response to even a moderate growth recovery.

Food inflation has accelerated to a six-month high, propelled by soaring vegetable prices and highlighting limitations of the Reserve Bank of India's monetary intervention after it raised rates for the 13th time in 19 months recently. Data released by the government on Thursday showed food inflation rose to 11.43% year on year for the week to October 15, compared with 10.6% in the preceding week, driven by a 25% jump in vegetable prices even as prices of food articles increased 0.25%.

Finance Minister Pranab Mukherjee on 19 October 2011 said that the government is concerned about the volatility of FII flows. Mukherjee said loose monetary policies adopted by central banks in advanced economies have added to global liquidity, driving investments into better off emerging economies and fueling inflation in these countries.

The falling rupee could bloat India's already mammoth import bill and further strain government finances as the fuel subsidy burden swells, Finance Secretary R.S. Gujral said Friday, 21 October 2011. The rupee hit a near 30-month low below 50 against the dollar on 21 October 2011. Elevated crude oil prices are likely to push the government to spend an additional Rs 40000 crore on fuel subsidies in the current year.

Meanwhile, the new takeover code regulations notified by the market regulator Sebi last month became effective from Saturday, 22 October 2011. With these rules coming into force, both promoter and public shareholders of a listed company would now get the same price for their shares being purchased by an acquirer. At the same time, an acquirer would have to make an open offer for purchase of a minimum 26% stake from public shareholders, as against 20% earlier.

The new rules would also help the listed companies to get more investment from private equity players and other investors who are not interested in a takeover, as the trigger point for an open offer has been raised to 25%, from 15% earlier. Now, an entity needs to make an open offer only if its holding reaches threshold limit of 25%, as against 15% earlier. The new regulations replace the takeover rules that were in force since 1997

Given the lackluster initial FII response to the government's sharply raising the ceiling of FII investment in long-term corporate bonds issued by the companies in the infrastructure sector in March 2011, the government on 12 September 2011, further relaxed the norms on FII investment in such bonds. Sebi had in early August 2011 allowed Qualified Foreign Investors (QFIs) to subscribe to Mutual Fund Debt Schemes which invest in the infrastructure sector subject to a total overall ceiling of $3 billion within the total ceiling of $25 billion.

The government has raised its borrowing target for the current fiscal year by Rs 52800 crore, fueling worries that it may even overshoot the new estimate because of muted revenue growth amid a slowing economy and swelling subsidies. The government will borrow Rs 2.2 lakh crore during October 2011-March 2012 period, or the second half of the fiscal year, compared with the target of Rs 1.67 lakh crore announced in budget in February 2011. C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council on 29 September 2011 said it is going to be difficult to achieve fiscal deficit target of 4.6% of GDP for the year ending March 2012.

The government's new borrowing programme may crowd out private borrowers who come into the market in the second half of the year. Credit growth normally picks up after October every year when the busy season starts.

The Union Cabinet on Tuesday, 25 October 2011 approved a national manufacturing policy, the first of its kind in the country, to increase manufacturing's share of national output as it aims to create millions of jobs and add capacity to sustain brisk economic growth through the next decade. The policy targets raising the share of manufacturing to 25% of gross domestic product by 2022 from the current 16% -- a level that has remained stagnant since 1980.

The new policy proposes developing National Investment and Manufacturing Zones, or mega-industrial parks, that will reduce the compliance burden on industry, the government said in a statement. The policy also aims to create 100 million additional jobs over the next decade, Commerce and Industry Minister Anand Sharma said. The government has identified seven locations across India to set up such industry parks, the government statement said.

Under the policy, a special company will be established that will be a one-stop shop for all clearances for businesses interested in setting up operations in the industry parks, the statement said. Small- and medium-sized companies will be offered tax breaks to entice them to the parks.

Asian stocks rose, poised for their best week in nearly three years on Friday as a long-awaited plan to resolve the European debt crisis encouraged investors to put money back in markets driving up prices of risky assets such as the euro and commodities. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan rose by between 0.77 % to 1.63%.

The deal in Europe calls for private banks and insurers to take 50 percent losses on their Greek debt as well as agreements on recapitalisation of hard-hit European banks and a leveraging of the bloc's rescue fund.

U.S. stocks surged 3% on Thursday as an agreement by European leaders to help contain the region's two-year debt crisis lifted a cloud hovering over markets. In a positive sign for the U.S. economy, the government's estimate of third-quarter growth expanded at the fastest pace in a year.