Market may extend recent steep slide on weak Asian stocks

The market may extend recent steep slide on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 34 points at the opening bell.

The BSE Sensex has lost 6.3% in the past six trading sessions to settle at 16,461.71 on Thursday, 17 November 2011, its lowest closing level since 7 October 2011, from a recent high of 17,569.53 on 8 November 2011 as weak Q2 results dampened sentiment. The Sensex lost 314.16 points or 1.87% on Thursday, 17 November 2011.

Foreign institutional investors (FIIs) sold shares worth Rs 195.20 crore on Thursday, 17 November 2011, as per the provisional data from the stock exchanges. Their outflow totaled Rs 1093.86 crore in three trading session from 15 to 17 November 2011.



Corporate earnings have been weak. The combined net profit of a total of 3,675 companies declined 35.9% to Rs 67507 crore on 20.6% growth in sales to Rs 1135022 crore in Q2 September 2011 over Q2 September 2010. The Q2 earnings season got over on Tuesday, 15 November 2011.

Oil exploration firms, PSU OMCs and airline stocks will be in action as oil prices tumbled on Thursday, with US crude dropping almost 4% as investors booked profits after a recent sharp rally. US crude for December delivery, which expires on Friday, 18 November 2011, settled at $98.82, down $3.77, or 3.67% the biggest one-day percentage loss for front-month crude on the New York Mercantile Exchange since 28 September 2011.

Meanwhile, a meeting the Empowered Group of Ministers (EGoM) scheduled for November to review diesel and cooking fuel prices has been reportedly put off. The meeting was scheduled to happen before the winter session of parliament which starts on 22 November 2011. The government controls the prices of diesel, kerosene and cooking fuel to keep a lid on inflation.

The government has raised the limit for foreign investments in government and corporate bonds by $5 billion each. The move is aimed at boosting overseas capital inflows, which have remained muted so far this year, and it is likely to support the Indian currency that has shed nearly 13% against the dollar this fiscal year that started April 1. Thomas Mathew, joint secretary of capital markets, told reporters on Thursday, 17 November 2011, that the incremental limit of $5 billion can be invested in securities without any residual maturity criterion.

In what seems to be a setback for economic reforms, the government has put off introduction or consideration and passing of key bills such as the Land Acquisition Bill, Direct Taxes Code Bill, the Banking and Insurance Bills during the winter session of Parliament. The winter session is scheduled to start from 22 November 2011. The Banking Bill was referred to the standing committee in March, while the Insurance Bill was sent to the committee in 2009. Giving details about the business of the proposed session, Parliamentary Affairs Minister, Mr Pavan Kumar Bansal on Wednesday, 16 November 2011, said that the Standing Committee on Rural Development needs more time on the land acquisition bill.

Bansal announced a list of 31 bills for consideration and passage during the winter session. It government also aims to introduce 23 new bills during the 21 sittings of the session. The Finance Ministry will also seek the approval of Parliament for additional expenditure.

The Union Cabinet on Wednesday, 16 November 2011, cleared the pension bill but decided not to limit foreign direct investment in the sector, retaining the flexibility to prescribe or change limit through an executive decision. The government will place the Pension Fund Regulatory and Development Authority Bill 2011 in the winter session of Parliament.

Food price index rose 10.63% and the fuel price index climbed 15.49% in the year to 5 November 2011, data released by the government on Thursday, 17 November 2011, showed. In the previous week, annual food and fuel inflation stood at 11.81% and 14.50%, respectively. The primary articles price index was up 10.39%, compared with an annual rise of 11.43% a week earlier.

The Reserve Bank of India (RBI) has announced its first government bond buyback under its open-market-operations program this year, in a move aimed at easing liquidity in the cash-strapped banking system. The plan to buy up to Rs 10000 crore of government bonds on 24 November 2011 comes as banks have been borrowing between Rs 80000 crore and Rs 1.3 lakh crore daily for the past week, underscoring the cash crunch in the local banking system. The Reserve Bank of India said it will buy the bonds through a multi-security auction using the multiple price method. It will announce the details of the bonds that it will buy back at the auction shortly, it added.

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 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.

Emerging markets such as India must take measures to boost long-term foreign direct investment to blunt volatility in exchange rates, and any capital control measures must be selective and temporary, a senior executive of the Asian Development Bank said on Monday, 14 November 2011. While capital flows and exchange rates are likely to be volatile in the short-term amid ongoing euro-zone debt concerns, India must focus on improving its investment climate by providing better infrastructure, putting in place a coherent manufacturing policy and developing financial markets, Managing Director General Rajat M. Nag said on the sidelines of the India Economic Summit.

Asian stocks fell for a fourth day on Friday, 18 November 2011, pulled down by fresh concerns about Europe's ongoing debt woes following a worrying Spanish bond auction. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Taiwan and Singapore fell by between 0.86% to 1.73%.

The losses came after auctions Thursday, 17 November 2011, saw average yields on 10-year Spanish government bonds hit a euro-era high ahead of a weekend election there, sending European and US stocks sharply lower.

Meanwhile, Italy's new government has announced far-reaching reforms in response to a European debt crisis that on Thursday pushed borrowing costs for France and Spain sharply higher. Italy's new technocrat prime minister, Mario Monti, unveiled sweeping reforms to dig the country out of crisis and said Italians were confronting a "serious emergency".

Investors dumped US stocks on Thursday, scared by the market's sudden fall through a key technical level brought on by more worries about Europe's debt troubles. New US claims for jobless benefits hit a seven-month low last week and permits for future home construction rebounded strongly in October, the latest data to suggest the economy was gaining traction