Market may open flat to slightly lower; Tata Steel in focus

The market may open flat to slightly lower after last two days of sharp rebound. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 8 points at the opening bell.

As per provisional figures foreign funds bought shares worth Rs 147.64 crore and domestic funds bought shares worth Rs 109.02 crore on Monday when market jumped by 2.75%.

Reliance Communications consolidated net profit fell 56.65% to Rs 480.27 crore on 5.75% decline in total income to Rs 5004.09 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result after market hours on Monday.

Tata Power Company's consolidated net profit jumped 377.87% to Rs 442.37 crore on 0.77% decline in total income to Rs 4519.18 crore in Q3 December 2010 over Q3 December 2009. The company announced Q3 result after market hours on Monday.

Steel giant Tata Steel announces Q3 results today.

The Q3 December 2010 results season is drawing towards a close. The results announced so far showed that the combined net profit of a total of 3200 companies rose 20.2% to Rs 86867 crore on 18.6% rise in sales to Rs 965247 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.

The growth outlook for major industrialised economies is picking up, although big differences in momentum remain between countries, the OECD's leading indicator for December showed on Monday. The Paris-based Organisation for Economic Development and Co-operation said its December composite leading indicator for 29 of its member countries rose to 102.8 from a revised 102.5 in November, pointing to stronger growth momentum.In its December leading indicator report, it said the reading for India pointed towards a slowdown, that for Russia pointed to growth and the indicator for Brazil suggested the country will continue to perform close to its long-term trend.

Asian markets rose on Tuesday tracking higher US markets. The key benchmark indices inn China, Indonesia, Japan, South Korea and Taiwan rose by between 0.01% to 0.56%. The key benchmark indices in Hong Kong and Singapore fell by between 0.41% to 0.51%.

Energy and commodity shares lifted Wall Street to modest gains on Monday. U.S. President Barack Obama proposed a federal budget that he said would cut the U.S. deficit by $1.1 trillion over the next 10 years. Congress must approve the plan, and Republicans, who are in the majority in the House, said it did not curb spending enough

Back home, the latest economic data, the headline inflation eased slightly in January on some moderation in manufactured products. The wholesale price index (WPI), rose 8.23% in January from a year earlier. The index rose 8.43% in December from a year earlier. Food prices in the WPI index jumped 15.7% in January compared with 13.6% 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 Centre has reportedly sent the empowered committee of state finance ministers yet another draft constitutional amendment on the proposed goods & services tax (GST) in a last-ditch attempt to reach a consensus before the Budget session of Parliament. The third draft reportedly proposes the creation of a GST Council through an Act of Parliament, instead of presidential order, as proposed in the previous draft.

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.