Market seen extending recent gains on positive Asian stocks

The market is likely to open higher on positive Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 11 points at the opening bell. Asian stocks rose on Thursday as investors await further cues from the central banks of any further stimulus to revive global economic growth. India's largest private sector aluminum producer by capacity Hindalco Industries' US unit Novelis Inc on Tuesday, 14 August 2012 posted lower quarterly revenue as shipments fell and aluminum prices remained weak. The Atlanta-based aluminum product maker's revenue fell 18 percent in the first quarter to $2.6 billion. Net income rose to $91 million from $62 million a year earlier as the company set aside less money for income tax during the quarter. Shipments of aluminum-rolled products dipped 6 percent to 722 kilotonnes during the latest concluding quarter. Average aluminum prices declined $626 per tonne in the first quarter compared to the same period last year. Bharti Airtel turns ex-dividend today, 16 August 2012, for a final dividend of Re 1 per share for the year ended 31 March 2012. GAIL (India) turns ex-dividend today, 16 August 2012, for a final dividend of Rs 5.70 per share for the year ended 31 March 2012. Hindustan Copper said after market hours on Tuesday, 14 August 2012, its net profit fell 20.52% to Rs 48.01 crore on 14.69% growth in total income to Rs 336.27 crore in Q1 June 2012 over Q1 June 2011. MMTC said after market hours on Tuesday, 14 August 2012, its net profit jumped 86.39% to Rs 12.06 crore on 73.52% fall in total income to Rs 5408.86 crore in Q1 June 2012 over Q1 June 2011. IDFC said after market hours on Tuesday, 14 August 2012, its consolidated net profit rose 21.06% to Rs 379.78 crore on 35.55% rise in total income to Rs 1842.17 crore in Q1 June 2012 over Q1 June 2011. Key benchmark indices edged higher for the second straight day on Tuesday, 14 August 2012 and attained their highest closing level in nearly 22 weeks after the latest data showed the rate of growth in inflation based on the wholesale price index (WPI) fell to the slowest pace in nearly three years in July 2012, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. The BSE Sensex jumped 94.75 points or 0.54% to 17,728.20, its highest closing level since 14 March 2012. The stock market had remained closed on Wednesday, 15 August 2012, on account of Independence Day. Foreign institutional investors (FIIs) bought shares worth net Rs 258.21 crore on Tuesday, 14 August 2012, as per provisional figures from the stock exchanges. FIIs bought shares worth a net Rs 4185.40 crore from the secondary equity markets in 9 trading sessions from 1 to 13 August 2012, as per data from Securities & Exchange Board of India (Sebi). 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 official Wholesale Price Index (WPI) for 'All Commodities' for the month July 2012 rose by 0.4 percent to 164.8 (Provisional) from 164.2 (Provisional) for the previous month, the Ministry of Commerce & Industry said in a statement on Tuesday, 14 August 2012. The annual rate of inflation, based on monthly WPI, stood at 6.87% (Provisional) for the month of July 2012 (over July 2011) as compared to 7.25% (Provisional) for the previous month and 9.36% during the corresponding month of the previous year. Build up inflation in the financial year so far was 2.36% compared to a build up of 3.14% in the corresponding period of the previous year. For the month of May 2012, both the final index and inflation based on final Wholesale Price Index for 'All Commodities' remained unchanged at its provisional level of 163.9 and 7.55% respectively as reported on 14 June 2012. The WPI inflation fell below the 7% level for the first time since November 2009, building hopes that the central bank will find more space to ease monetary policy and revive industrial growth that has slumped largely due to high interest rates over the past couple of years. However, weak rainfall this year and a possibility that the government may allow local fuel retailers to raise prices could drive up inflation. Seasonal rainfall this year has been about 17% below normal. Further, core inflation, also known as non-food manufacturing inflation, has 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. Ahead of the data Reserve Bank of India Governor D Subbarao on Monday, 13 August 2012, said high inflation leaves no room for easing policy to counter a potential external shock to Asia's third-largest economy. Unlike during the global financial crisis of 2008-09, "there is just no space for fiscal or monetary responses," Subbarao said in a speech to a conference organized by a body which advises the state government of Kerala on economic policy. "Inflation is high, oil prices are at elevated levels, the external sector is under stress," he added. The 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. Mr. Subbarao said wholesale price inflation--the mostly closely watched inflation gauge in India--remains above the central bank's tolerance level. The RBI is scheduled to undertake a mid-quarter review of the monetary policy on 17 September 2012. The Central Statistics Office (CSO) will unveil data on consumer price index (Agricultural Labourers/ Rural Labourers) on Friday, 17 August 2012. India's trade deficit widened in July, dragged by weaker exports which fell at a much quicker pace than imports. The trade deficit was $15.5 billion during the month, compared with $14.8 billion a year earlier. The data will increase worries that the wide trade gap could hurt the local currency and worsen the country's balance-of-payment situation. Exports in July fell 14.8% from a year earlier to $22.4 billion, while imports declined 7.6% to $37.9 billion, Anup Pujari, director-general of foreign trade, told reporters on Tuesday, 14 August 2012. A contraction in demand in the US and Europe is hurting exports, Trade Secretary S.R. Rao said. Prime Minister Dr. Manmohan Singh last week said the fundamentals of the economy remain strong. "We have the highest savings and investments rate in the world," Dr. Singh said. This year we will see better than 6.5% (gross domestic product) growth of last year, he said. Union Finance Minister P. Chidambaram last week said 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 last week. 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 recently 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. Mr. Chidambaram said that the government has received requests to put off plans to implement the General Anti-Avoidance Rules (GAAR) which aim to check tax avoidance. The implementation of GAAR was postponed by one year in order to provide an opportunity of wider consultation before such a legislation is implemented, Mr. Chidambaram said in the lower house of parliament while replying to lawmakers' questions. The provisions of GAAR are directed toward preventing tax avoidance by way of aggressive tax planning, he added. 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. In the next few weeks, the government will announce a number of decisions to attract more people to invest in mutual funds, insurance policies and other well-designed instruments, Mr. Chidambaram said last week. The India Meteorological Department (IMD) expects normal rains in August -- a critical month for summer crops. It expects rainfall to be 5-6% below average in September due to the possibility of El Nino. The weather office expects rainfall during August-September to be 91% of the long-term average. The monsoon has been less than average during the current year. Quantitatively, monsoon season rainfall for the country as a whole was deficient by 17% till 7 August 2012, with large deficit ranging from 21% to 59% or more in Nagaland, Manipur, Mizoram, Tripura, Gangetic West Bengal, Bihar, West Uttar Pradesh, Haryana, Chandigarh, Delhi, Punjab, Himachal Pradesh, Jammu & Kashmir, West Rajasthan, East Rajasthan, Gujarat, Saurashtra & Kutch, Madhya Maharashtra, Marathwada, Tamilnadu, Puduchery, North Interior Karnataka, South Interior Karnataka and Kerala. A panel of Indian ministers last week approved steps to contain the impact of a near-drought situation. The steps include providing a diesel-price subsidy to farmers, increasing the subsidy on seed supplies and removal of the import tax on oilmeals. Rice sowing has picked up according to the latest data released by the Ministry of Agriculture. Rice was sown in 264.39 lakh hectares (lh) till Thursday, 9 August 2012, compared with 233.68 lh until 3 August 2012. Rice sowing so far has been below the normal area of 272.58 lh for the summer sown crop by this time of the year. Cumulative sowing of coarse cereals totaled 140.89 lh till 9 August 2012, compared with 135.75 lh until 3 August 2012. Sowing of coarse cereals remains much lower than 181.24 lh of normal area for the crop this time of the year. Sowing of pulses totaled 74.48 lh till 9 August 2012, compared with 72.79 lh until 3 August 2012. Sowing of pulses remains lower than 92.81 lh of normal area for this time of the year. Sowing of oilseeds totaled 151.82 lh till 9 August 2012, compared with 145.17 lh until 3 August 2012. It is slightly lower than the normal area of 153.39 lh for oilseeds by this time of the year. Sowing of cotton totaled 109.23 lh till 9 August 2012, compared with 100.14 lh until 3 August 2012. The normal cotton sowing area of 99.9 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.41 lh as on 9 August 2012, exceeding the normal area of 8.23 lk for the crop by 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. An India-Mauritius joint panel will discuss a series of proposals to review the double taxation avoidance treaty between the two nations on 22-24 August in Mauritius. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation. Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India's tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty. Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year's national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured. Draft guidelines issued by Indian government for implementing the controversial anti-avoidance tax proposal viz. the GAAR state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities. Asian stocks rose on Thursday as investors await further cues from the central banks of any further stimulus to revive global economic growth. Key benchmark indices in Singapore, Japan, China, Taiwan, Hong Kong and Indonesia were up by between 0.01% to 1.45%. South Korea's Kospi Composite Index shed 0.03%. US stocks ended mixed on Wednesday after industry output rose 0.6% for the month of July 2012, the fastest pace since April 2012. The report followed strong July retail sales and July employment data released earlier in the month. The Dow Jones Industrial Average shed 7.36 points, or 0.06%, at 13,164.78. The Standard & Poor's 500 index gained 1.60 points, or 0.11%, at 1,405.53 and the Nasdaq Composite index rose 13.95 points, or 0.46%, at 3,030.93. The July housing starts report and the August Philadelphia Fed index will be released today, 16 August 2012. Data on initial weekly jobless claims will be released on the same day. US retailer Wal-Mart Stores Inc. unveils its quarterly results today, 16 August 2012. The University of Michigan will release its preliminary consumer sentiment survey for August tomorrow, 17 August 2012. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. A group led by German Professor Markus Kerber has reportedly filed in a lawsuit to the German constitutional court aiming to delay the approval of the European Stability Mechanism (ESM) -- a permanent bailout fund for financially troubled countries in the 17-nation euro zone. The ESM needs to be ratified by all euro zone nations. It has already been backed by Germany's parliament. Germany's President Joachim Gauck is yet to sign it into law, pending several challenges with Germany's constitutional court. Germany's Federal Constitutional Court has said it will decide by September 12 whether the legislation is compatible with Germany's constitution. That date may have to be pushed back following the new complaint, reports suggest. German gross domestic product rose 0.3% on a seasonally-adjusted basis in the second quarter of 2012, compared to the first quarter, the federal statistics office, Destatis, reported on Tuesday, 14 August 2012. Compared to the same quarter a year ago, GDP rose 0.5% on an unadjusted basis and 1% on a calendar-adjusted basis. French gross domestic product was unchanged in the second quarter of 2012, compared to the first quarter, statistics agency Insee reported on Tuesday, 14 August 2012. Household consumption expenditure dipped 0.2%, while gross fixed-capital formation rose 0.6%. Domestic demand, excluding changes in inventories, contributed 0.1 point to growth in the quarter, the agency said. Euro-zone gross domestic product contracted by 0.2% in the second quarter of 2012 compared to the previous quarter, according to a preliminary reading published by Eurostat on Tuesday, 14 August 2012. In first quarter of 2012 the growth rate for the currency bloc was flat. Compared with the same quarter in 2011, gross domestic product for the euro area dropped by 0.4%. The country-specific readings showed that GDP fell the most in Portugal, down 1.2%, while Spain's economy contracted by 0.4% in second quarter. The ZEW economic sentiment indicator, a closely-watched measure of German investor sentiment, dropped to minus 25.5 in August from minus 19.6 in July, the Mannheim-based Center for European Economic Research, or ZEW, said on Tuesday, 14 August 2012. The index measures investors' expectations over the next six months. The ZEW current-conditions index fell to 18.2 from 20.1 in July. The index readings are based on a survey of 262 financial analysts, the ZEW said. Britain's annual consumer price index rose 2.6% in July from 2.4% in June, boosted largely by upward pressure on transport costs, particularly air fares, and prices for clothing and footwear, the UK Office for National Statistics reported on Tuesday, 14 August 2012. Prices saw a 0.1% monthly rise in July. Spanish banks' level of borrowing from the European Central Bank (ECB) rose to a record high in July as tensions mounted in the weeks following the announcement of a 100 billion euro ($122 billion) bailout for the country's financial industry. Data released on Tuesday by the Bank of Spain showed that net borrowing rose to euro 375.55 billion, up from euro 337.21 billion in June. It was the tenth month in a row of increases. Over the past year Spanish banks have sharply increased their funding from the ECB as investors in the private sector have sought to reduce their exposure to banks in Europe's fiscally frail southern economies.