Market may start lower on weak Asian stocks

The market may start lower tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 36 points at the opening bell. High volatility is expected on the bourses this week as traders roll 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 on Thursday, 29 December 2011.

Key benchmark reversed direction after hitting 1-1/2-week highs in mid-morning trade on Tuesday, 27 December 2011 on concerns about upcoming Q3 December 2011 corporate earnings. The BSE Sensex shed 96.80 points or 0.61% to settle at 15,873.95, its lowest closing level since 23 December 2011.



Foreign funds bought shares worth Rs 214.31 crore on Tuesday, 27 December 2011, as per provisional data from the stock exchanges. FIIs had bought shares worth Rs 113.43 crore on Monday, 26 December 2011 and Rs 84.27 crore on Friday, 23 December 2011. 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 1274.60 crore so far this month (till 27 December 2011), as per provisional data from the stock exchanges.

Tata Power Company announced after market hours on Tuesday that it has signed a share purchase agreement with BP Alternative Energy Holdings to purchase the latter's 51% equity and preference shares in the Joint Venture -- Tata BP Solar India. On completion of transaction, Tata Power will own 100% of the in Tata BP Solar India.

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.

The Lok Sabha on Tuesday night passed a historic Lokpal and Lokayuktas Bill, 2011, but defeated a parallel Constitution (116th Amendment) Bill, which would have given the Lokpal constitutional status. The Whistle-blowers Bill (Protection to Persons Making the Disclosures Bill, 2010) was also passed by the Lok Sabha, which literally burnt the midnight oil to complete the legislative business. In the next step, the Bill will have to get the nod from the Rajya Sabha before it goes to the President for her assent. The UPA government does not have a majority in the Upper House and so the fate of the anti-graft Bill will be at the mercy of the Opposition.

Asian stocks fell on Wednesday mid concern economic growth in the region is slowing and before Italy sells debt today and tomorrow. Key benchmark indices in Hong Kong, Singapore, Indonesia, China, Japan, South Korea and Taiwan fell by between 0.2% to 1.03%.

Economic reports today showed Japan's industrial production dropped and confidence among South Korean manufacturers sank to a 30-month low.

U.S. stocks edged higher on Tuesday putting blue-chips on track for a fifth straight day of gains, as investors welcomed a better-than-expected reading on consumer confidence and oil rose above $100 a barrel, lifting energy stocks. Helping the rally was a reading on consumer confidence that showed the measure at an eight-month high of 64.5 in December, easily topping expectations for a reading of 56.0.The S&P/Case-Shiller index of home prices in 20 major U.S. cities showed a year-on-year decline of 3.4% in October, giving little solace to investors looking for a slowdown in the recent months' accelerating decline. However, regional Federal Reserve reports on Richmond and Dallas-area manufacturing came in below expectations.