Market may open flat to slightly lower

Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 4.50 points at the opening bell. Asian shares traded mostly higher on Tuesday, 29 November 2011, extending an advance made in the previous session as investors hoped for a timely resolution to Europe's debt problems.

Key benchmark indices reached their highest closing level in nearly 1-1/2 week on Monday, 28 November 2011, as global stocks surged driven by renewed optimism that European officials were poised to take action to alleviate debt crisis wreaking havoc in the euro zone. The BSE Sensex jumped 471.70 points or 3.01% to settle at 16,167.13, its highest closing level since 18 November 2011.



Foreign institutional investors (FIIs) sold shares worth Rs 302.59 crore on Monday, 28 November 2011, as per the provisional data from the stock exchanges. FIIs have pressed heavy sales of Indian stocks over the past two weeks. Their outflow totaled Rs 7591.26 crore from 15 to 28 November 2011.

A latest government statement in parliament dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam, last week, said the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

Corporate earnings have been weak. The combined net profit of a total of 3,897 companies declined 36.3% to Rs 67112 crore on 20.5% growth in sales to Rs 1143432 crore in Q2 September 2011 over Q2 September 2010.

On the macro front, the government unveils Q2 September 2011 gross domestic product (GDP) data on Wednesday, 30 November 2011. The GDP is seen rising 6.9% in Q2 September 2011 as per median estimate of a total of 14 economists polled by Capital Market. The economy expanded 7.7% in Q1 June 2011 from a year earlier, helped by strong growth in the services sector. The GDP is seen rising 7.3% in the fiscal year through March 2012 (FY 2012) as per median estimate of the poll.

Prime Minister Manmohan Singh has convened an all-party meeting today, 29 November 2011, in an attempt to break a political impasse that disrupted parliament proceedings for the second day in a row on Monday, 28 November 2011, over the government's decision to increase foreign direct investment or FDI in the retail sector. The opposition wants to discuss the government's decision on FDI in retail under an adjournment motion -- which would end with a vote. The government has rejected this -- it wants a debate, but no vote.

Uproar in parliament on Friday, 25 November 2011, over the cabinet's decision to open up the retail market to global supermarket chains forced Trade Minister Anand Sharma to announce the details of the new FDI policy at a press conference instead of the government's plan of announcing the same in parliament on that day. Sharma said the "India-specific" scheme would create tens of millions of jobs. The proposal sets a minimum investment limit of $100 million per chain -- 50% to go on developing rural infrastructure and establishing a cold-chain system -- and 50% on front-end retailing, or stores. The multi-brand retailers will be permitted only in cities with a population of one million or more.

The government on Monday, 28 November 2011, changed its stand on sourcing rules for international retailers who want to set up shop in the South Asian nation, in the face of stiff political opposition to its move to open up the sector to foreign investment. On Friday, 25 November 2011, the government said foreign retailers looking to invest in India should procure 30% of manufactured or processed products from small-scale industries "anywhere in the world." However, on Monday, 28 November 2011, it said they must source a minimum of 30% from small industries in India, so as to encourage local manufacturing and create employment.

The first week of the winter session was washed out last week without any business being transacted. Besides FDI in retail, the opposition was also out with their blazing guns to attack the government on the issue of price rise and corruption. Parliament did not run on the first three days of the session due to protests over rising prices and the demand of separate statehood for Telangana region in Andhra Pradesh. The winter session concludes on 21 December 2011.

The Union Cabinet on Thursday, 24 November 2011, approved the long-awaited Companies Bill that will completely recast the key provisions of the decades-old Companies Act 1956. Following Cabinet clearance, it is now likely to be taken up for consideration and passage in the ongoing winter session of Parliament. The Bill suggests that profit-making companies above a certain threshold will have to spend at least 2% of the average profits in the preceding three years on corporate social responsibility (CSR) activities and make a disclosure to shareholders about the policy adopted in the process.

The government diluted the provision after stiff opposition from the industry and decided not to make 2% CSR spend mandatory. The Bill also seeks to provide for class action suits and a fixed term for independent directors. Among other things, it proposes to tighten laws for raising money from the public. The Bill also seeks to prohibit any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence. The Bill will give more powers to the Serious Frauds Investigation Office.

Food price index rose 9.01% and the fuel price index climbed 15.49% in the year to 12 November 2011, government data on Thursday, 24 November 2011, showed. In the previous week, annual food and fuel inflation stood at 10.63% and 15.49%, respectively. The primary articles price index was up 9.08%, compared with an annual rise of 10.39% a week earlier.

Monetary policy has a limited role in curbing food price pressures in India but such action may still be warranted if high food inflation persists, the central bank governor said on 22 November 2011. "A lasting solution to food price pressures lies in a supply response that raises agricultural production and productivity, improves supply chain management and sets the right incentive framework for both producers and consumers," D Subbarao said, according to a copy of his speech at a conference released by the Reserve Bank of India.

Subbarao said that the supply measures taken to meet the growing demand for protein-rich foods have been inadequate. Food prices have been hovering at their highest levels in several months due to sustained demand from the growing middle class that is increasingly consuming more of high-protein diets like milk, fish and meats, offsetting price decline in other commodities.

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.

Asian shares traded mostly higher on Tuesday, 29 November 2011, extending an advance made in the previous session as investors hoped for a timely resolution to Europe's debt problems. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea and Taiwan were up by between 0.32% to 1.41%. Singapore's Straits Times fell 0.11%.

Asian, European and US shares had all closed with sharp gains on Monday, 28 November 2011, prompted in part by optimism for a solution to Europe's debt woes. Signs of strong US retail sales over the Thanksgiving holiday also boosted equity market sentiment.

Euro zone finance ministers meet in Brussels today, 29 November 2011, to thrash out details on how the European Financial Stability Facility will boost its muscle by insuring sovereign debt with guarantees.

US stocks rebounded from seven days of losses on Monday as investors used the latest effort from European leaders to resolve the region's debt crisis as an opportunity to cover short positions. After the market's close, Fitch Ratings revised to negative the outlook on the United States' AAA credit rating after a special congressional committee failed to agree on at least $1.2 trillion in budget cuts. A report on US consumer confidence in November, which is expected to have risen, is due later in the global day today, 29 November 2011.