Market may open flat to slightly lower

Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 2.50 points at the opening bell. The market may remain volatile this week as traders roll over positions in the futures & options (F&O) segment from the near-month August 2012 series to September 2012 series. The August 2012 derivatives contracts expire on Thursday, 30 August 2012. The Supreme Court on Friday, 24 August 2012, issued notice to Tata Motors on the West Bengal state government's appeal challenging a Calcutta high court judgment quashing a state law for returning land acquired from farmers for the aborted Nano small car factory in Singur. A bench of Justices H L Dattu and C K Prasad issued notice to the car manufacturer and said the high court directed stay on operation of the law will continue. A division bench of the high court on June 22 annulled the law enacted by the Trinamool Congress government in West Bengal to wrest control of the land acquired for setting up the Nano car factory at Singur by Tata Motors. The court had ruled that the Singur Land Rehabilitation and Development Act, 2011 was unconstitutional and void. Prior to this, the single judge of the high court had upheld the Act. Castrol India has fixed 5 September 2012 as the record date for the purpose of determining those shareholders who would be entitled for bonus shares in the ratio of 1:1. Grasim Industries turns ex-dividend today, 27 August 2012, for dividend of Rs 22.50 per share for the year ended 31 March 2012 (FY 2012). PSU OMCs, oil exploration firms and airline stocks will be in focus as US crude oil futures rose in Asian electronic trading on Monday, 27 August 2012, as Tropical Storm Isaac threatened production in the oil-rich Gulf of Mexico. US crude oil futures for October delivery were up $1.35 barrel or 1.4% at $97.51 a barrel. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms. Higher crude oil prices will increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. While, for airlines, prices of jet fuel are directly linked to crude oil prices. Aviation turbine fuel, or jet fuel constitutes more than 50% of operating cost for airliners. State-run oil marketing companies -- Indian Oil Corporation, BPCL and HPCL -- revise jet fuel prices on the 1st and 16th of every month based on the average international crude price in the preceding fortnight. Key benchmark indices edged lower in choppy trade to reach one-week closing lows on Friday, 24 August 2012, as investors grew gloomy about the health of the global economy and after a Federal Reserve official threw cold water on the notion that another round of stimulus from the Federal Reserve is on its way. The BSE Sensex lost 67.01 points or 0.38% to settle at 17,783.21 on that day, its lowest closing level since 17 August 2012. FIIs have made sustained purchases of Indian stocks this month. Foreign institutional investors (FIIs) bought shares worth net Rs 226.06 crore on Friday, 24 August 2012, as per the provisional data from the stock exchanges. Their inflow into the secondary equity market totaled Rs 5655.70 crore during 15 trading sessions from 1 to 23 August 2012, as per data from Securities & Exchange Board of India. The inflow this month comes on the top of substantial purchases last month. FIIs bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. The stock market remains open for short duration of 1-1/2 hours on Saturday, 8 September 2012, as the Bombay Stock Exchange is testing its disaster recovery site. Trading will start at 11:15 IST and end at 12:45 IST. Trades done on 8 September 2012 will be settled on Tuesday 11 September 2012 as a separate settlement, the National Stock Exchange (NSE) said in a circular issued on Friday 24 August 2012. The police detained scores of anticorruption activists who tried to march Sunday to the homes of top political leaders to protest a scandal over the government's sale of coal fields without competitive bidding. Union Minister of Commerce, Industry and Textiles Mr. Anand Sharma will meet Chinese Commerce Minister Mr. Chen Deming in New Delhi on Monday, 27 August 2012, for the 9th session of India-China Joint Economic Group (JEG). Mr. Sharma is likely to raise the issue of India's growing trade deficit with China. The issues related to market access in IT and ITES and Indian agricultural products are also likely to be raised. Export of pharmaceutical products, diamonds and export of sea food to China are also likely to be discussed. Investment related issues and import of Indian films by Chinese side are also likely to come up for discussion, the Ministry of Commerce & Industry said in a statement issued on Saturday, 25 August 2012. At the meeting, the Chinese side is likely to bring to the fore the ways to strengthen cooperation in trade remedies and service trade between the two Asian nations. The border trade issues between India and China and modes to improve investment and operation environment for Chinese enterprises in India are also likely to be put to discussion. It was in December 1988 during the visit of the then Prime Minister of India Mr. Rajiv Gandhi to Beijing, that a Joint Group on Economic Relations, Trade, Science & Technology (JEG) with the Commerce Ministers as the Chairman on the Indian side and the Minister for Foreign Economic Relations and Trade as the Chairman on the Chinese side was formed. The total bilateral trade between India and China for the financial year 2011-12, stood at $75.45 billion as compared to $59 billion during 2010-11. During FY 2011-12, India's exports to China stood at $17.90 billion while imports stood at $57.55 billion. The provisional trade deficit for 2011-12 stood at $39.65 billion. Union Finance Minister Mr. P. Chidambaram on Friday, 24 August 2012, said that the goods and services tax (GST) is a more effective and efficient substitute for a plethora of indirect taxes. The Finance Minister said that he is hopeful that the GST Bill would be passed before the end of the current financial year. The Finance Minister further said that though there are still some issues relating to GST and its Network (GSTN) to be resolved, yet they are not insurmountable. The Finance Minister said that the objective is to put in place an effective and efficient tax system which is friendly and fair to the taxpayers. He said that once GST is implemented, it will not be adversarial to the taxpayers. The Empowered Committee of State Finance Ministers (EC) and the Union Finance Minister endorsed the recommendations of the Empowered Group on the IT strategy for GST, the structure and role of GSTN SPV, as also the selection of NSDL as technology partner for incubating SPV. At a meeting of the consultative committee attached to the Ministry of Finance held on Friday, 24 August 2012, some of the members stated that firstly the issue of loss to the states be settled as a priority to the satisfaction of all states. This is causing delay on the part of the states in accepting GST and this uncertainty may be settled once for all. Some of the members suggested that decision making process of the GST Council be made more practicable by providing decisions with two-third majority of the states rather than on consensus basis. Similarly, issues relating to dispute settlement mechanism and exclusion of certain products from the GST system among others were also raised during the discussion, the Finance Ministry said in a statement issued on Friday, 24 August 2012. The Central Statistics Office will unveil Q1 June 2012 GDP data on Friday, 31 August 2012. India's GDP growth slowed to a nine-year low of 5.3% in Q4 March 2012 due to high interest rates, sluggish global demand and the government's failure to carry out economic reforms. Markit Economics will unveil HSBC India Manufacturing Managers' Index (PMI) for August 2012 on 3 September 2012. On 5 September 2012, Markit Economics will unveil HSBC India Services PMI for August 2012. The government has rejected the Comptroller and Auditor General of India's (CAG) report on allocation of coal blocks in which it has indicated a Rs.1.85 lakh crore ($37 billion) loss to the exchequer, saying the notion of presumptive loss is flawed. "If the coal is not being mined, there is no question of gain or loss... the notion of this presumptive loss is flawed," Finance Minister P Chidambaram said on Friday, 24 August 2012, at a joint press conference in New Delhi with Coal minister Sriprakash Jaiswal. Out of the 57 blocks considered by the CAG, mining was carried out in only block, Mr. Chidambaram said. The finance minister made a fervent appeal to the opposition, especially the Bharatiya Janata Party (BJP), to allow parliament to function. Chidambaram said Prime Minister Dr. Manmohan Singh is ready to make a statement and debate the issue in parliament in whatever manner the opposition wanted. Both houses of parliament were repeatedly adjourned for the fourth consecutive day on Friday, 24 August 2012, as BJP kept up its demand for the prime minister's resignation over irregularities in allocation of coal blocks. Prime Minister Dr. Manmohan Singh was in charge of the coal ministry during the allocations questioned by the CAG. Trade Minister Anand Sharma Thursday, 23 August 2012, said that a deadlock in parliament over allegations of irregularities over the allocation of coal blocks is delaying the government's move to push ahead with reforms to stimulate economic growth. The government has very limited time to take economic reform measures given that assembly elections in Gujarat and Himachal Pradesh (HP) are scheduled in December this year. It will difficult for the government to enact controversial measures close to the assembly polls. After elections in Gujarat and HP, assembly elections are planned in a total of 10 states during the period from March 2013 to January 2014. The next general election is due in May 2014. The Union Cabinet on Thursday, 23 August 2012, deferred a decision on changes proposed in a draft land acquisition law that is aimed at streamlining the land acquisition process for projects. Foreign direct investment (FDI) in India slumped 78% to $1.24 billion in June 2012 from $5.65 billion in June 2011, government data showed on Friday 24 August 2012. For the April-June period--the first quarter of the fiscal year--FDI fell 67% to $4.42 billion. The Reserve Bank of India (RBI) said in its Annual Report for 2011-12, a statutory report of the Central Board of RBI, that India's economic growth during 2012-13 is expected to stay below trend at around the same level as in the previous year at 6.5% whereas inflation is likely to remain sticky around 7% with upside risks emanating from a deficient monsoon. While the rate of growth in headline inflation declined in July 2012, the core inflation, also known as non-food manufacturing inflation, accelerated, indicating overall price pressures haven't ebbed enough. Core inflation, which strips off volatile food and fuel prices, picked up to 5.5% on year in July from 5% in June. RBI last cut rates by 0.5 percentage point to 8% from 8.5% in April, its first move to reverse a 20-month rate-tightening cycle. It then held rates steady in June and at its last rate-setting meeting on July 31, saying that a cut would exacerbate inflationary pressures. The RBI is scheduled to undertake a mid-quarter review of the monetary policy on 17 September 2012. Rice sowing has picked up this month following revival of monsoon rains. According the latest data released by the Ministry of Agriculture, rice was sown in a total area of 329.19 lakh hectare (lh) until 24 August 2012, compared with 307.76 lh as on 17 August 2012. Rice sowing so far has already exceeded the normal area of 318.83 lh for the summer sown crop by this time of the year. Cumulative sowing of oilseeds has also exceeded the normal area by this time of the year. Cumulative sowing of oilseeds totaled 164.29 lh until 24 August 2012, compared with 160.77 lh as on 17 August 2012. Sowing of oilseeds so far has already exceeded the normal area of 163.80 by this time of the year. Sowing of cotton totaled 111.53 lh till 24 August 2012, compared with 110.26 lh until 17 August 2012. The normal cotton sowing area of 105.75 lh for the cotton crop by this time of the year has already been surpassed. Cumulative sowing of coarse cereals totaled 165.34 lh till 24 August 2012, compared with 157.97 lh until 17 August 2012. Sowing of coarse cereals remains lower than 194.24 lh of normal area for the crop this time of the year. Sowing of pulses totaled 88.30 lh till 24 August 2012, compared with 85.32 lh until 17 August 2012. Sowing of pulses remains lower than 99.38 lh of normal area for this time of the year. Sowing of jute and mesta totaled 8.78 lh until 24 August 2012, compared with 8.77 as on 17 August 2012. Sowing of jute and mesta remains lower than 9 lh of normal area for this time of the year. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. The Indian government on Wednesday, 22 August 2012, eased rules governing overseas borrowing, hoping to ease borrowing by local companies and spur capital inflows. In one of the most significant elements of the change, the government raised by 50% the limit on rupee loans that infrastructure and manufacturing companies are allowed to refinance through overseas borrowings. Such companies will be able to refinance these loans by up to 75% of their average foreign-exchange earnings over the past three years, up from the previous limit of 50%, the finance ministry said. Union Minister of Commerce, Industry & Textiles Mr. Anand Sharma said 16 August 2012 that the government will come out with announcements pertaining to industrial environment that will address the subdued sentiment in the industry. Speaking after the fourth meeting of the Government-Industry Task Force Mr. Sharma said that there is a shared concern over the declining industrial production, particularly the manufacturing sector. Prime Minister Dr. Manmohan Singh said in his Independence Day speech on 15 August 2012 that at a time when the global economy is passing through a difficult phase, India must make every effort to resolve the problems inside the country so that the nation's economic growth and the creation of employment opportunities in the country are again speeded up. If we do not increase the pace of the country's economic growth, take steps to encourage new investment in the economy, improve the management of government finances and work for the livelihood security of the common man and energy security of the country, then it most certainly affects our national security, Dr. Singh said. The prime minister said the government has recently taken new measures to accelerate infrastructure development. Ambitious targets have been fixed in roads, airports, railways, electricity generation and coal production. The government will take steps to increase investment for infrastructure development with the help of the private sector, Dr. Singh said. "To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India", Dr. Singh said. Union Finance Minister P. Chidambaram said early this month that a path of financial consolidation will be unveiled shortly. Government finances are under pressure as expenses exceed revenue, mainly because of subsidies doled out for cheaper supplies of food, fuel and fertilizer. Mr. Chidambaram said that the fiscal-deficit target for the current financial year will be reassessed after a mid-year review later this financial year depending on the pace of expenditure and the resource position of the government. The government is aiming to restrict spending on subsidies, the finance minister said. The government has already taken some steps to reduce expenditure. In late May, the finance ministry asked government departments to reduce their non-plan spending -- expenditure that won't create long-term assets -- by 10% this fiscal year as part of its efforts to keep the fiscal deficit under check. The government intends to fine tune policies and procedures that will facilitate capital flows into India, Mr. Chidambaram said early this month. Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors, Mr. Chidambaram said. The government has appointed two committees -- one to examine anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) legal provisions and guidelines and the other to review taxation of the IT sector and Development Centres. Mr. Chidambaram said he has also directed a review of tax provisions that have a retrospective effect in order to find fair and reasonable solutions to pending as well as likely disputes between the Tax Departments and the Assessees concerned. The implementation of GAAR proposal introduced in the Union Budget 2012-13 in March 2012 by then-finance minister Pranab Mukherjee has been deferred to 1 April 2013. This came after heavy criticism from foreign investors who fear that GAAR would give the authorities arbitrary powers to examine any deal that they feel is designed to avoid tax. Prime Minister Dr. Manmohan Singh last month constituted an expert committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) to undertake stakeholder consultations and finalise the guidelines for GAAR by 30 September 2012. Dr. Singh last month also decided to refer the issue of implications on FIIs and portfolio investors of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India to the Expert Committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR). "It is necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment", the Prime Minister's Office (PMO) said in a statement issued on 30 July 2012. Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the PMO said. Asian stocks were mostly lower Monday after the latest data showed a 5.4% decline in profit from China's major industrial enterprises for July compared to the year-ago period. China is the world's second biggest economy after the US. Key benchmark indices in China, Hong Kong, Singapore, South Korean and Taiwan shed by between 0.09% to 1.02%. Indonesia's Jakarta Composite was flat. Japan's Nikkei Average rose 0.38%. China's Premier Wen Jiabao told the state radio that the nation needs policies to help struggling exporters. US stocks climbed on Friday, 24 August 2012, after Federal Reserve Chairman Ben Bernanke reiterated his claim that the central bank has the means to ease financial conditions and strengthen the recovery. Bernanke made the comment in a letter to a congressional oversight panel. Bernanke is scheduled to give a speech on 31 August 2012 at the Kansas City Federal Reserve Bank's annual symposium in Jackson Hole, Wyo. Key US economic data due this week includes the June Case-Shiller home price index on Monday, 27 August 2012, the GDP revision for the second quarter on Wednesday, 29 August 2012, personal income and spending data for July on Thursday, 30 August 2012, and the Chicago PMI on Friday 31 August 2012. US market remains closed on Monday, 3 September 2012, for Labor Day holiday. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. French President Francois Hollande on Saturday, 25 August 2012, told Greek Prime Minister Antonis Samaras that Greece must demonstrate commitment to overhauling its economy so Europe can do its part and move on from the debt crisis. Greece needs once again to demonstrate the credibility of its program and the determination of its leaders to go all the way, Hollande said at a joint press conference with Samaras after talks in Paris on Saturday, 25 August 2012. Once these commitments, which are not only financial but about structural reforms that the Greeks want, have been ratified by parliament and confirmed, Europe must do its part, Hollande said. While Hollande repeated his view that he wants Greece to stay in the euro, his remarks underline the hardening of France's position since Greece's budget troubles were first made public in late 2009. Hollande also said that both Greece and Europe need to put the turmoil behind them as quickly as possible. Samaras, for his part, said that he's determined to keep his country in the 17-nation single currency. Samaras held talks with German Chancellor Angela Merkel in Berlin on Friday, 24 August 2012. Merkel said that Germany will stand behind the Greek government as it struggles to overhaul the economy and that she is deeply convinced that Samaras will make every effort to solve the country's problems. "I want Greece to stay in the euro zone and that's what I'm working for. Fulfilling commitments and expectations will lead to a return of confidence in the euro zone," Merkel said on Friday, 24 August 2012, after holding talks with Samaras. The troika of lenders which consists of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) is set to decide on the disbursement of the next tranche of money from Greece's 130 billion euro bailout package next month. European Central Bank president Mario Draghi is scheduled to give a speech on Saturday, 1 September 2012. Draghi boosted markets in late July 2012 when he said the ECB would do everything in its power to preserve the euro, but investors are still searching for definite actions to back up those words. European Central Bank (ECB) holds its monthly policy meeting on euro area interest rates on 6 September 2012. UK's central bank -- the Bank of England -- holds its monthly meeting on interest rates on the same day.