Market may open slightly lower; food inflation data eyed

Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 9 points at the opening bell. On macro front, the government will today, 5 January 2012, 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 24 December 2011.

Volatility ruled the roost on Wednesday, 4 January 2012, as key benchmark indices flip-flopped between negative and positive territory. After a choppy start, the barometer index, BSE Sensex, shot up to the psychological 16,000 mark in mid-afternoon trade. Gains could not be sustained as the market soon reversed direction. Concerns about upcoming Q3 December 2011 earnings and weak European stocks hit investor sentiment adversely. The BSE Sensex lost 56.72 points or 0.36% to settle at 15,882.64, its lowest closing level since 2 January 2012.



Foreign institutional investors (FIIs) bought shares worth Rs 138.97 crore on Wednesday, 4 January 2012, as per provisional data from the stock exchanges. FIIs had bought shares worth Rs 255.39 crore on Tuesday, 3 January 2012. FIIs had offloaded shares worth a net Rs 1287.84 crore in three trading sessions from 29 December 2011 to 2 January 2012, as per provisional data from stock exchanges.

ONGC board in its 226th Meeting held on 4th January 2012 notified four more discoveries totaling 15 in the fiscal year ending March 2012. ONGC board has also approved an Interim dividend of 6.25 per equity share of 5 each for the financial year 2011-12. The record date for the same has already been fixed for 9th January, 2012 and payment of the Interim Dividend to the shareholders shall start from Tuesday, 10th January, 2012 onwards.

UltraTech Cement's cement production is higher by 10.8%at 35.7 lakh million tonne, and dispatches, at 36.2 lakh million tonne higher by 10.5% in December 2011 over December 2010.

Auto shares may remain in the spotlight as the 11th Indian Auto Expo kicks off today.

Market regulator Securities & Exchange Board of India (Sebi) has allowed auctioning of securities through stock exchanges and introduced a new method for institutional placement of stocks. As per the auctioning route, a special window can be used by promoter stakeholders to sell at least 1% of the paid-up capital of a company. This will be similar to the block-deal mechanism for secondary stock market transactions, but with lesser restrictions. Under the institutional placement programme (IPP), shares can be sold only to qualified institutional buyers.

Exchanges will provide a separate window for the offer for sale of shares which will co-exist with the normal trading hours. But, promoter or promoter group of companies will not be allowed to bid for the shares. Sebi also said the auction method can be only used by promoters of top 100 companies based on average market capitalisation for sale of their stakes. The regulator said the IPP method can be used to increase public holding by 10% and could be offered to only qualified institutional buyers with 25% being reserved for mutual funds and insurance companies. Issuers will have to announce an indicative floor price or price band at least one day before the opening of the offer.

A special trading session will be held on Saturday, 7 January 2012, as the National Stock Exchange is upgrading the capacity of its Futures and Options trading system hardware and software. Trading will take place from 11:15 IST to 12:45 IST on that day. Trades done on Saturday, January 07, 2012, will be settled on Tuesday, 10 January 10, 2012, as a separate settlement, NSE said in a circular.

Starting off the New Year on a liberalisation note, the government on Sunday, 1 January 2012, announced its decision to allow Qualified Foreign Investors (QFIs) to directly invest in the Indian equity market from 15 January 2012. A QFI is an individual, group or association resident in a foreign country that is compliant with Financial Action Task Force (FATF) standards. QFIs include pension funds which normally tend to stay invested for a longer period of time. QFIs do not include FIIs/sub accounts. In August last year, the government allowed foreign investors to directly invest up to $13 billion in equity and debt schemes of mutual funds.

Qualified foreign investors, or QFIs, will now be able to invest individually up to 5% of the capital of the Indian company. Cumulatively, QFIs can invest up to 10% of the capital of the company being invested in. These limits are over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India, a government statement said.

The next major trigger for the market is Q3 December 2011 corporate earnings, which will start tricking from the 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 lower volume growth in a slowing economy, higher raw material costs and higher interest charges.

IT bellwether Infosys and housing finance major HDFC report Q3 results on 12 January 2012. HDFC Bank and Bajaj Auto unveil Q3 results on 19 January 2012. Axis Bank unveils Q3 results on 20 January 2012. Dabur India unveils Q3 results on 31 January 2012. Mahindra & Mahindra unveils Q3 results on 7 February 2012.

India's services sector grew at its fastest pace in five months in December riding on a surge in new business and expansion in employment, but rising input prices will likely add to inflationary pressures in the coming months, a survey showed. The HSBC Markit Business Activity Index -- based on a survey of around 400 firms -- rose to 54.2 in December from 53.2 in November, staying above the 50 mark that separates growth from contraction for the second month in a row. In the December survey, the new business sub-index jumped to 55.7 from 52.3 in November, thanks to an improvement in demand. Both the services PMI index and the new business sub-index were at their highest levels since July.

India's manufacturing activity surged to a six-month high in December thanks to a spike in factory output and new orders from domestic and international firms, a survey of purchasing managers showed early this week. The HSBC Markit India Manufacturing PMI jumped to 54.2 from 51 in November, its biggest monthly rise since April 2009. The index has stayed above the 50 mark that separates growth from contraction for 33 months now.

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 early last week showed. The infrastructure sector accounts for 37.9% of India's industrial output.

India's November exports rose an annual 3.87% to $22.3 billion, while imports for the month rose 24.55% to $35.9 billion, the government said in a statement early this week. India's trade deficit in November was at $13.6 billion.

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 RBIto 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 29 December 2011. 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.

The RBI is likely to begin easing monetary policy to address concerns about economic growth, Governor D Subbarao said in an interview to a foreign electronic media house, reiterating comments made by the RBI when it kept rates unchanged on 16 December 2011. At its mid-quarterly monetary policy review meet on 16 December 2011, the RBI(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 had said in a statement on 16 December 2011. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI had said.

RBI had 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.

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 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.

The budget for 2012/13 ending March will be presented after elections scheduled in five states, Finance Minister Pranab Mukherjee said on Monday, 2 January 2012. State elections are scheduled between the end of January and early March. The annual budget is usually presented on the last working day of February. 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.

Most of the Asian shares rose on Thursday ahead of a French bond auction later in the day. Key benchmark indices in Indonesia, Hong Kong, Singapore, South Korea, and Taiwan rose by between 0.23% to 0.3%. Key benchmark indices China and Japan fell by between 0.34% to 0.57%.

The euro zone's sovereign funding plans and U.S. economic data, including U.S. jobs figures due on Friday, are the primary focus for market participants to gauge whether investors would take or avert risk. France plans to raise up to 8 billion euros in long-term debt on Thursday but a key litmus test for investor confidence is next week's debt sales by Spain and Italy, the two countries most exposed to the crisis. This follows Wednesday's 10-year German Bunds auction, which drew a subdued demand of bids amounting to 1.3 times the amount offered.

French President Nicolas Sarkozy will meet German Chancellor Angela Merkel in Berlin on 9 January 2012 for talks that are likely to centre on new rules to enforce budget discipline across the European Union (EU). The two leaders are anxious to flesh out a plan agreed at a December 2011 summit by all EU members except Britain for a new treaty to forge closer fiscal integration, as Europe battles to stem a sovereign debt crisis in the euro zone.

Finance ministers from the EU's 27 members will meet on 23 January 2012 before their leaders hold a summit a week later. They will be under intense pressure to find a definitive solution to the crisis which threatens the very survival of the single currency, 10 years after it came into circulation.

U.S. stocks fared better than European peers, ending nearly flat on Wednesday after data showed new U.S. factory goods orders rose solidly in November while business capital spending cooled.