Market may open flat to slightly higher

The market may open slightly higher extending last three days' gains. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 7 points at the opening bell. Asian markets were mixed.

Brokers have advised clients not to sell shares today, 16 February 2011, in the cash market which they had bought yesterday, 15 February 2011, due to clubbing of settlements due to a bank holiday today, 16 February 2011, for Muslim festival Id-E-Milad.



The Central Bureau of Investigation has reportedly widened its probe into the award of telecom licences during the tenure of former telecom minister A Raja, summoning several senior officials of most telecom and realty firms connected to the 2008 spectrum allocation. CBI officials questioned Unitech managing director Sanjay Chandra, D B Realty partner Vinod Goenka, Loop Telecom's CEO Sandip Basu, S-Tel's chief financial officer Arun Mandhana, and Tata Realty's CEO Sanjay Ubale and CFO Kishore Saletore.

"In continuation of the ongoing investigations, I am here today to personally clarify certain issues raised by the CBI," Unitech's Chandra said in a statement on Tuesday, 15 February 2011.

As per provisional figures, foreign funds bought shares worth Rs 233.05 crore and domestic funds sold shares worth Rs 167.85 crore on Tuesday, 15 February 2011.

Tata Steel's consolidated net profit jumped 112.21% to Rs 1003.02 crore on 8.91% rise in total income to Rs 28985.12 crore in Q3 December 2010 over Q3 December 2009. The company announced the Q3 result after market hours on Tuesday, 15 February 2011.

The combined net profit of a total of 3492 companies rose 19.6% to Rs 88094 crore on 18.4% rise in sales to Rs 985097 crore in Q3 December 2010 over Q3 December 2009.

There are concerns of slowdown in corporate profit growth going ahead. With the rise in key policy rates by the Reserve Bank of India (RBI) recently, interest cost will only rise in the coming quarters that could hurt earnings going forward. If raw material costs keep rising at a fast clip, companies will feel the heat of slowing sales growth and rising cost of operations that could start eating into profit growth.

Asian markets were mixed on Wednesday. The key benchmark indices in China, Hong Kong, Indonesia and Singapore fell by between 0.04% to 0.22%. The key benchmark indices in Japan, South Korea and Taiwan rose by between 0.02% to 0.39%.

US stock market slipped off 2-1/2-year highs in light volume on Tuesday, 15 February 2011. Meanwhile, US retail sales data cast doubts on a rebound in consumer spending, a vital part of the economic recovery. On the flip side, a gauge of manufacturing in New York State climbed to its highest in eight months.

The euro zone economy ended last year with stable growth, failing to meet expectations for an acceleration as expansion in the three largest nations fell short of forecasts and Greece and Portugal contracted. The European Union's statistics office Eurostat said gross domestic product in the 16 countries using the euro grew 0.3% in the October-December period, the same as in the third quarter, and 2.0% year-on-year.

Back home on the macro front, the latest economic data showed that the headline inflation eased slightly in January 2011 on some moderation in prices of manufactured products. The wholesale price index (WPI), rose 8.23% in January 2011 from a year earlier. The index had risen 8.43% in December 2010. Food prices in the WPI index jumped 15.7% in January compared with 13.6% rise in December.

The industrial output in December 2010 rose a slower-than-expected 1.6% from a year earlier. Manufacturing output, which constitutes about 80% of the industrial production, rose an annual 1%, the statistics office said in a statement. Growth in industrial output in November 2010 was revised upwards to 3.62% from earlier 2.7%

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by the finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations. The Finance Minister may announce a new road map for the Goods & Services Tax (GST). The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

The government may also announce some populist measures in the Budget given that assembly elections are due in Kerala, Tamil Nadu, West Bengal and Assam. In all these states, the Congress is potentially looking to regain power or to retain it.