Market may remain volatile during special trading session

The market may remain volatile and volume will be thin during the special 1-1/2-hour trading session being held today, 7 January 2012. The special trading session is being held today, 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. Trades done on today, 7 January 2012, will be settled on Tuesday, 10 January 10, 2012, as a separate settlement, NSE said.

Key benchmark indices registered marginal gains after witnessing wild intraday gyrations in the latter part of the trading session on Friday, 6 January 2012. The BSE Sensex rose 10.65 points or 0.07% to settle at 15,867.73, its highest closing level since 4 January 2012.



Foreign institutional investors (FIIs) bought shares worth Rs 10.44 crore on Friday, 6 January 2012, as per provisional data from the stock exchanges. FII inflow totaled Rs 786.22 crore in four trading sessions on 3 to 6 January 2012, as per provisional data from the stock exchanges. Earlier, FIIs had offloaded shares worth a net Rs 1287.84 crore in three trading sessions from 29 December 2011 to 2 January 2012.

The Securities and Exchange Board of India (Sebi) has fined top executives of Jaiprakash Associates for insider trading in the company's stock in 2008. The stock market regulator has imposed a penalty of Rs 10 lakh each on Manoj Gaur, chairman of Jaiprakash Associates, his wife Urvashi, and brother Sameer Gaur, as well as some top executives of the company. The penalty is to be deposited within 45 days of the order, Sebi said.

The regulator has alleged that these individuals had taken advantage of their position by trading shares of Jaiprakash Associates while they were in possession of unpublished price sensitive information (UPSI). Sebi had investigated all trades in the stock from September 29, 2008, to October 27, 2008. But Manoj Gaur in a statement issued late Friday evening denied any wrongdoing. "The findings in the Order are completely erroneous and contrary to factual position. It is unfortunate that despite adequate representation to the Adjudicating Officer, frivolous inferences have been drawn. Aggrieved by the Order, we are in the process of challenging the same before the Securities Appellate Tribunal," Gaur said.

The Reserve Bank of India (RBI) on Thursday, 5 January 2011, raised the annual limit of foreign currency convertible bonds (FCCBs) for companies to $750 million under the automatic route from $500 million earlier. The increase in the ceiling for FCCBs under automatic route will not only help Indian corporates across all segments access higher quantum of overseas funds but also encourage greater inflow of foreign exchange. Corporates in specified service sectors like hotels, hospitals and software, can raise FCCBs up to $200 million subject to the condition that the proceeds would not be used for acquisition of land. It also said henceforth ECBs of up to $20 million or equivalent in a financial year will have a minimum average maturity of three years, while for ECBs of $20-750 million the average maturity would be of five years.

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. TCS and HCL Tech unveil quarterly results on 17 January 2012. HDFC Bank and Bajaj Auto unveil Q3 results on 19 January 2012. Axis Bank unveils Q3 results on 20 January 2012. JSW Steel reports its Q3 standalone results on 20 January 2012.

Asian Paints and Zee Entertainment Enterprises unveil Q3 results on 21 January 2012. Kotak Mahindra Bank announces Q3 results on 23 January 2012. Biotech major Biocon unveils Q3 results on 24 January 2012. Dabur India unveils Q3 results on 31 January 2012. Mahindra & Mahindra unveils Q3 results on 7 February 2012. India Cements announces Q3 results on 6 February 2012.

Food inflation plunged into the negative territory in the fourth week of December mainly due to base effect, data released by the Government showed on Thursday, 5 January 2011. Fuel inflation edged up though. Food inflation shrank by 3.36% in the week ended December 24, after rising by 0.42% in the preceding week. Inflation in the Primary Articles group fell to 0.1% in the week under review, from 2.7% in the week ended December 17. Inflation in the Fuel & Power group stood at 14.60% in the week ended December 24, versus 14.37% 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 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.

US stocks mostly declined on Friday, 7 January 2012, as investors measured further evidence of an improving labor market against Europe's troubles, illustrated by the euro's decline. The Bureau of Labor Statistics reported that the economy added a net 200,000 nonfarm payrolls in December, better than forecasts for a 150,000 gain. The jobless rate in the US fell to 8.5%, nearly a three-year low.

In Europe, Italy's borrowing costs surged, with the yield on the country's 10-year note currently at 7.09%, a level generally viewed as unsustainable. Both Ireland and Portugal had to resort to financial rescues once their borrowing costs exceeded 7%.

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.

European confidence in the economic outlook fell to the lowest in more than two years and unemployment remained at a 13-year high as the euro area's leaders struggled to contain a worsening fiscal crisis. An index of executive and consumer sentiment in the 17- nation euro area fell to 93.3 in December from a revised 93.8 in the previous month, the European Commission in Brussels said on Friday. The unemployment rate held at 10.3% in November, a separate report showed.

A rating downgrade on Friday left Hungary's debt rated "junk" across the board, underscoring investors' doubts about the government's willingness to change its controversial policies in return for aid to stave off a financial crisis. Fitch Ratings said it was downgrading Hungarian sovereign debt by one notch to BB+ with a negative outlook, putting the country's bonds in the higher risk category and suggesting the investment climate was not going to get any better. Fellow credit rating agencies Moody's and Standard & Poor's already rate Hungary below investment grade.

On Monday, 9 January 2012, all eyes will focus on China, which will tentatively release its latest economic growth, inflation and trade balance figures. Also on Monday, US consumer credit figures will come out, while in Europe traders will keep an eye on Swiss unemployment rates and French consumer spending figures. The UK, meanwhile, will release manufacturing and industrial output figures while in Canada, housing starts and building permits will be released.