Market seen halting eight-day slide on bargain hunting

Market is likely to open firm on Tuesday, 22 November 2011 on likely bargain hunting after posting losses in prior eight trading sessions. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a rise of 37 points at the opening bell. Global cues were mixed with Asian markets trading mixed today while US markets ended with steep losses on Monday.

Key benchmark indices skidded for the eighth straight day on Monday, 21 November 2011 to hit 6-1/2-week lows as European and US debt problems pulled world stocks lower. The BSE Sensex tumbled 425.41 points or 2.6% to settle at 15,946.10, its lowest closing level since 5 October 2011. The Sensex has lost 1,623.43 points or 9.24% in the past eight trading sessions from a high of 17,569.53 on 8 November 2011.



Data showing substantial selling by foreign funds recently weighed on sentiment. Foreign institutional investors (FIIs) sold shares worth Rs 743.02 crore on Monday, 21 November 2011, as per the provisional data from the stock exchanges. Their outflow totaled Rs 2708.50 crore in five trading session from 15 to 21 November 2011.

The market may remain volatile this week as traders roll over positions in futures & options (F&O) segment from the near-month November 2011 series to December 2011 series. The near-month November 2011 F&O contracts expire on Thursday, 24 November 2011.

Corporate earnings have been weak. The combined net profit of a total of 3,766 companies declined 35.9% to Rs 67501 crore on 20.6% growth in sales to Rs 1136200 crore in Q2 September 2011 over Q2 September 2010.

The government recently 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 1 April 2011. Thomas Mathew, joint secretary of capital markets, told reporters on 17 November 2011, that the incremental limit of $5 billion can be invested in securities without any residual maturity criterion.

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 starts tomorrow, 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, Pavan Kumar Bansal on 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 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.

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 Thursday, 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 RBI 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 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.

Select Asian stocks declined after the congressional committee charged with reducing the US deficit failed to agree on cuts. Japan's stocks pared losses after the yen fell against the euro and the dollar. Key benchmark indices in China, Hong Kong and Japan, were down by between 0.08% to 0.27%. Key benchmark indices in Indonesia, South Korea, Taiwan and Singapore rose by between 0.39% to 0.51%.

US stocks fell for a fourth session on Monday, followed by sharp losses in commodities. The Dow Jones industrial average lost 248.85 points, or 2.11%, at 11,547.31. The Standard & Poor's 500 Index was down 22.66 points, or 1.86%, at 1,192.99 and the Nasdaq Composite Index was down 49.36 points, or 1.92%, at 2,523.14.

Meanwhile, investors are watching as the US supercommittee inched closer to a 23 November 2011 deficit-cutting deadline without visible progress. There was concern over the chance of downgrades to the U.S. credit rating as well as the economic-growth impact in the event $1.2 trillion in automatic cuts take effect, as they were slated to do if an agreement isn't reached.