Market may open higher on firm Asian stocks

The market may open higher on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 44 points at the opening bell. Asian stocks edged higher on the last trading day of 2011, as rising US home sales signaled the world's largest economy is weathering Europe's debt crisis.

Closer home, key benchmark indices fell for the third straight trading session on Thursday, 29 December 2011, as index heavyweight Reliance Industries (RIL) dropped more than 3%. The BSE Sensex lost 183.92 points or 1.17% to settle at 15,543.93, its lowest closing level since 20 December 2011.



Foreign institutional investors (FIIs) sold shares worth a hefty Rs 1015.82 crore on Thursday, 29 December 2011, as per provisional data from the stock exchanges. Before Thursday's heavy sales, FIIs had 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. Earlier, FIIs were net sellers for ten days in a row from 9 to 22 December 2011. FIIs have sold shares worth a net Rs 2208.98 crore so far this month (till 29 December 2011), as per provisional data from the stock exchanges.

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. Analysts expect weak Q3 December 2011 results due to slower volume growth, higher raw material costs and higher interest costs.

The Reserve Bank of India on Thursday allowed foreign entities that have contributed to rupee-denominated overseas debt of local companies to hedge their currency risk, in a move that could encourage much-needed capital inflows to strengthen the swooning local unit. The decision on hedging may prod foreign companies to bring cash into India through loans to their local units as they could reduce the risks from currency fluctuations. Any such hedge must be backed by proof of underlying exposure, and must be of a tenor that doesn't exceed the underlying transaction, according to a central bank notification.

This is the latest in a string of measures taken by the Reserve Bank of India to boost confidence in the rupee, and ensure that local companies continue to be able to tap offshore funding. Other steps include freeing up the interest rates banks can pay on the deposits of Indians living abroad, in a bid to boost foreign currency inflows into India.

India and Japan on Wednesday, 28 December 2011, agreed 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.

"At a time when the world economy is unstable, as shown by Europe's sovereign problems and other issues, Japan and India both recognized the need to bolster a Japan-India currency swap line to ensure stability in the financial markets," said a statement issued by Japan's Finance Ministry. Over the three years through 2010, India's exports to Japan climbed 36% to $5.7 billion, while its imports from Japan rose 47% to $9 billion.

The swap deal is part of a package of agreements that include Indian pledges to relax its financial regulation so that Japanese companies can make investments more easily. The deregulatory steps, proposed by Japan, aim to support a bilateral infrastructure project called the Delhi-Mumbai Industrial Corridor. Japan will invest $4.5 billion over next five years to develop this project.

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.

Food inflation rose at its slowest pace in more than five years in the third week of December 2011, bolstering hopes of a steady easing in overall price pressures which could prompt Reserve Bank of India to consider cut in interest rates to revive a slowing economy. Food inflation eased to 0.42% in the week ended December 17 from 1.81% in the preceding week, the Commerce & Industry Ministry said on Thursday. Inflation in the Primary Articles group eased to 2.7% in the week under review, from 3.78% in the week ended December 10. Inflation in the Fuel & Power group stood at 14.37% in the week ended December 17, from 15.24% in the previous week.

At its mid-quarterly monetary policy review meet on 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.

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.

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 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.

High drama in the Rajya Sabha over the Lokpal and Lokayukta Bill that took acrimonious turns during the over 12-hour debate on Thursday ended abruptly at the stroke of midnight without the House taking a vote on the Bill as it ran out of scheduled time. The House was adjourned sine die by Chairman Hamid Ansari after a verbal duel marred proceedings since 11.30 p.m. as some members including UPA ally Trinamool Congress interrupted Minister of State for Personnel Affairs V. Narayanasamy's stout defence of the provisions of the Bill that came under attack. The Bill, which was passed in the Lok Sabha on Wednesday after failed moves in 43 years, appeared jinxed throughout the day when it seemed that the government was not able to muster a simple majority required for its passage. The Bill seemed jinxed as there have been eight attempts earlier since 1968.

Asian stocks nudged higher on Friday, the last trading day of 2011, as positive data from the United States helped allay concerns on the global economy, while year-end short covering lifted crude prices. Key benchmark indices in China, Hong Kong, Singapore, Indonesia, Taiwan and Japan rose by between 0.03% to 1.13%.

HSBC's closely watched survey of Chinese manufacturing firms showed slightly more weakness than an initial reading released earlier this month. The results of the China Purchasing Managers' Index for December, unveiled Friday, stood at 48.7, compared to the earlier "flash" reading of 49.0. While below the 50 level separating expansion from contraction, it was still higher than the survey's 47.7 result for November.

US stocks gained on Thursday as investors were heartened by data showing a modest improvement in US housing and employment sectors.