Market may extend recent losses on weak Asian stocks; food inflation data eyed

The market may extend two-day losses on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 23 points at the opening bell. Stocks may remain volatile today, 29 December 2011, as traders rolled over positions in futures & options (F&O) segment from the near-month December 2011 series to January 2012 series. The near-month December 2011 F&O contracts expire today, 29 December 2011.

On macro front, the government will today, 29 December 2011, unveil data on some wholesale price indices viz. the food price index, the primary articles index and the fuel price index for the year through 17 December 2011.



Key benchmark indices fell for the second straight day to reach their lowest closing level in one week on Wednesday, 28 December 2011 on reports Indian and Mauritian tax officials have begun talks on revising the double taxation avoidance pact between the two countries. The BSE Sensex shed 146.10 points or 0.92% to settle at 15,727.85, its lowest closing level since 21 December 2011.

Foreign funds bought shares worth Rs 81.44 crore on Wednesday, 28 December 2011, as per provisional data from the stock exchanges. FIIs bought stocks worth a net Rs 493.45 crore in four trading sessions from 23 to 28 December 2011, as per provisional data from the stock exchanges. Before recent inflows, FIIs were net sellers for ten days in a row from 9 to 22 December 2011. FIIs have sold shares worth a net Rs 1193.16 crore so far this month (till 28 December 2011), as per provisional data from the stock exchanges.

ICICI Bank, India's largest private sector bank has reportedly increased interest rates on Non Resident External (NRE) deposits upto 9.25%. This rate is effective from 29 December 2011.

Mahindra & Mahindra said Wednesday it will raise prices of its XUV500 sport-utility vehicle by 3%-4% because of higher raw-material costs and a weaker rupee. The company will increase prices by Rs 30,000 to Rs 55,000 at showrooms in New Delhi from 1 January 2011, India's biggest sport-utility vehicle maker by volume said in a statement. The XUV500, introduced in September, currently sells for Rs 10.80 lakh to Rs 12.80 lakh at showrooms in New Delhi. Mahindra had received 8,000 bookings for the vehicle within 10 days of its launch, prompting the company to stop fresh sales as it was working on monthly output of 2,000 units at its west India plant. Mahindra plans to reopen bookings for the XUV500 in January after raising output of the vehicle to 3,000 a month. It plans to further raise production of the vehicle to 5,000 a month in June.

The Japanese and Indian governments agreed Wednesday to set up a three-year, $15 billion bilateral-currency swap line in an effort to buttress their economies against Europe's sovereign debt crisis. The new swap line—five times that of the previous arrangement that expired in early summer—follows a Japan-South Korea deal in October to boost their bilateral swap pact to $70 billion from $13 billion.

A government statement in parliament last month dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam has said that 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.

The next major trigger for the market is Q3 December 2011 corporate earnings which will start tricking from second week of January 2012. The focus will be on guidance from the company managements on outlook for the remaining part of the year and for the next year. Advance tax collection from the country's top 100 companies, as per the final numbers, declined by 1.4% to Rs 30763 crore in the third quarter of 2011-12, indicating sluggishness in economy. Advance taxes are collected in four installments -- 15% by 15 June; 40% by 15 September; 75% by 15 December and 100% by 15 March.

Prime Minister Manmohan Singh last week said he was disappointed to hear negative comments from industry leaders that the government's policies were leading to a slowdown. Singh, who met members of his Trade and Industry Council, said such comments strengthened negative forces who had no stake in the country's development. The UPA government has been battling criticism over its handling of the economy and the perception of policy paralysis in the aftermath of a string of scandals which hit the headlines since last year. Several top industrialists had written to the government expressing frustration at the slow pace of reforms and the gloomy atmosphere.

Credit rating agency Moody's Investors Service on 14 December 2011 said that the sharp decline in the value of the Indian rupee against the dollar over the past few months is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground.

The infrastructure sector output grew 6.8% in November from a year earlier, sharply higher than the annual growth of 3.7% in November last year, data released by the government on Monday, 26 December 2011, showed. The infrastructure sector accounts for 37.9% of India's industrial output.

The food inflation eased sharply to 1.81% in the year to 10 December 2011, from an annual 4.35% rise in the previous week, government data showed on Thursday, 22 December 2011. The fuel inflation remained unchanged at 15.24% in the latest week compared with the prior week, data showed, while the primary articles price index rose 3.78%, compared with an annual rise of 5.48% in the previous week.

At its mid-quarterly monetary policy review meet on Friday, 16 December 2011, the Reserve Bank of India (RBI) left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI said in a statement. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI said.

RBI said inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces. RBI also said that the rupee remains under stress. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

India may face the risk of stagflation if the government doesn't take urgent steps to tame inflation and stimulate growth, a parliamentary panel on finance warned on Thursday, 22 December 2011. The Standing Committee on Finance blamed the Reserve Bank of India's 13 interest-rate increases over the past 21 months for stalling economic growth. "Measures taken by the government and the RBI so far have squarely failed to rescue the economy from unabated inflation. Instead, monetary measures initiated for this purpose have only resulted in worsening the condition of the economy further," the report said.

Finance minister Pranab Mukherjee on Sunday, 25 December 2011, said he did not think there was any problem in presenting the Budget for 2012-13 on schedule in the wake of the announcement of assembly elections in five states. Mukherjee, however, said the date for the presentation of the budget will be fixed after discussions at various levels. The Union Budget is presented on the last date of February every year.

The Election Commission on Saturday, 24 December 2011, announced the dates for the assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Manipur and Goa. Uttar Pradesh will have polling on February 4, 8, 11, 15, 19, 23 and 28, while Uttarakhand and Punjab will go to polls on January 30. Manipur will have polls on January 28 and Goa on March 3.

Anti-graft activist Anna Hazare, 74, on Wednesday cut short a three-day hunger strike campaign calling for stronger legislation to combat corruption as concerns mounted over his health. The Lok Sabha passed a landmark bill on Tuesday to create an anti-corruption ombudsman.

Asian stocks fell for a third day on Thursday on concern Europe's debt crisis will slow the global economy. Key benchmark indices in Hong Kong, Singapore, Indonesia, Japan, South Korea and Taiwan fell by between 0.18% to 0.9%. China's Shanghai Composite rose 0.05%.

The European Central Bank said yesterday its balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after lending to banks last week. South Korean factory production fell for a second straight month, while data today may show Italian business confidence slumped and U.S. pending sales of previously owned homes rose at a slower pace.

Italy will sell as much as 8.5 billion euros in notes due from 2014 to 2022, a day after borrowing costs fell at a bill auction. Italian 10-year yields were little changed at 7% yesterday after the Treasury sold 9 billion euros of 179-day bills at a rate of 3.251 percent, down from 6.504 percent at the previous auction on 25 November.

US stocks fell on Wednesday in another low-volume session as investors stepped back after a string of gains and waited for the start of 2012 to place any large bets. Equities ended mostly unchanged on Tuesday on about half of the year's daily average volume as investors paused following a 5% gain in the previous week.