Market may open higher; Rail Budget in focus

The market may open higher, snapping recent losses if trading of S&P CNX Nifty futures on the Singapore stock exchange is of any indication. It indicate a gain of 18 points at the opening bell. Oil stabilized on Friday after a sharp reversal from a 2-1/2 year peak overnight, calming concerns that a surge in prices would hurt economic recovery. US crude oil futures for April 2011 were at $96.71 a barrel, down 57 cents, or 0.59%. As per provisional figures foreign funds sold shares worth Rs 2702.22 crore and domestic funds bought shares worth Rs 1029.92 crore on Thursday, 24 February 2011.



The Railway Budget will be tabled in the parliament by railway minister Mamta Banerjee today, 25 February 2011. The Economic Survey will be tabled in the parliament later in the day after the Railway Budget The passenger fares are likely to be remained untouched in the rail budget. More than 100 new trains are likely to be introduced. Some nonstop Durontos may see the day light. The introduction of mega base kitchens could be the highlight of this budget. In an attempt to attract external investment the railways might introduce certain schemes and services for the private players. The railways had requested Rs 39,000 crore from the Centre.

Asian markets were mixed on Friday. The key benchmark indices in Hong Kong, Japan and Singapore rose by between 0.22% to 0.7%. The key benchmark indices in South Korea, Taian, Indonesia and China fell by between 0.21% to 0.85%.

The US markets mostly closed lower but well off the day's lows in a volatile session on Thursday. In economic news, new U.S. claims for jobless aid fell last week, hinting at an improvement in the labor market, but declines in new home sales and orders for a range of factory goods in January showed the economy still faced headwinds.

International trade picked up in the last three months of 2010 when growth in Chinese imports far exceeded its exports, reducing the country's trade surplus, the Organisation for Economic Cooperation and Development said on Thursday. Merchandise exports from the Group of Seven industrialised countries plus Brazil, Russia, India and China rose 8% in the fourth quarter from the previous three months while imports gained 7%, the OECD said. In the third quarter, exports and imports had both grown 1%.

Back home, food price index rose 11.49% and the fuel price index climbed 12.14% in the year to 12 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 11.05% and 11.92%, respectively. The primary articles price index was up 15.77% in the latest week, compared with an annual rise of 14.59% a week earlier.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations.

Pawan Kumar Bansal, the minister of parliamentary affairs, last week, said the government will introduce a legislation on goods and service tax (GST) in the Budget session of parliament. 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.

Marketmen expect the government to continue thrust on development spending in the Union Budget 2011-12 to be unveiled on 28 February 2011. The capital goods sector expects the government to selectively raise import barriers for capital equipment, especially power equipment to facilitate domestic players. For the auto sector, marketmen expect the government to keep excise duty rate unchanged in the Budget. In the previous budget, the excise duty was increased by 2%.

The IT industry expects extension of the sunset clause on tax exemption for software technology parks under Section 10 A/10 B which is due to expire in March 2011. For the metal sector, marketmen expect hike in import duty on HR coil from 5% to 10% in the Budget to encourage the growth of domestic steel industry. The metal industry also expects a continued thrust on infrastructure spending in the Budget.

Banking and financial sector anticipates that the government might reduce the tenure limit for tax exempt deposits from five years to three years in the Budget. Market men also expect government subsidy/concessions on interest rates to be provided on lending to State Electricity Boards (SEBs) given their weak financial health. Another expectation is that of a hike in limit of refinancing from India Infrastructure Finance Company (IIFCL) to commercial bank loans for public-private partnership (PPP) projects in critical sectors from the current Rs 6000 crore.

The cement sector has sought a uniform rate of excise duty on cement as compared to differential rate of excise duty on cement sold above or below maximum retail price (MRP) of Rs 190 per 50 kilogram bag. The FMCG sector anticipates a continued thrust and higher allocations to social and developmental programs.

The media sector expects a relaxation of foreign direct investment (FDI) norms i.e. an increase in FDI limits from currently 49% in direct to home (DTH) and cable, 26% in news broadcasting & print media and 20% in radio sector.