Market may open lower on crisis in Libya; RIL in focus

The market may open on a weak note on an across-the-board slide in Asian shares caused by growing unrest in Libya. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 61 points at the opening bell. Stocks may remain volatile this week ahead of the expiry of the near-month February 2011 derivatives contracts on Thursday, 24 February 2011. As per provisional figures, foreign funds sold shares worth Rs 245.42 crore and domestic funds sold shares worth Rs 27.61 crore on Monday, 21 February 2011.



Index heavyweight Reliance Industries (RIL) will be in focus and may help cap the fall after the company said after market hours on Monday, 21 February 2011 that British Petroleum (BP) will take 30% stake in 23 oil and gas blocks of the firm. The deal would fetch Reliance Industries $7.2 billion. RIL would also be entitled to future performance payments of up to $1.8 billion based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to $20 billion, RIL said in a statement.

The two petroleum majors have also entered into a 50-50 joint venture for sourcing and marketing of gas in India. The joint venture is also aimed at creating infrastructure for transportation and marketing of natural gas in India. The RIL stock had risen 2.04% on Monday ahead of the announcement.

A large number of stock deals cut by foreign institutional investors (FIIs) have reportedly come under the glare of tax authorities for alleged non-payment of securities transactions tax (STT). Over 1,500 verification notices have been served to NSE, India's largest stock exchange, institutional brokerages, which act as intermediaries in secondary market trades, and all leading foreign portfolio funds, most of which are offshore entities. They have been asked to provide details of transactions for the past few years and the STT paid on the deals.

STT is paid for trades where stocks are delivered to the buyer as well as for intra-day transactions where the buyer and seller square up positions before the closing hour. The tax under-recovery relates to deals where participatory notes (or PNs) were issued by FIIs. PNs are notes that allow offshore investors to trade in Indian stocks. The Income-Tax (I-T) department has questioned the PN deals that appear like day trades report said.

Asia stock prices fell on Tuesday as intensifying unrest in Libya made investors worried about the Middle East's political stability going forward, resulting in a sell-off of risk-sensitive assets. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan fell by between 0.93% to 2.23%.

Local media reports say Libyan armed forces had launched strikes on anti-government protesters, causing more than 200 casualties. The nation's leader Moammar Gadhafi said he's still in the capital, rejecting earlier reports that he might have exiled himself. His comments suggest his willingness to hold on to his 41-year-old regime.

Moody's Investors Service changed the outlook on the Japan's Aa2 sovereign rating to negative from stable on Tuesday, warning that government policies may not be enough to rein in the country's huge public debt.

US markets were closed on Monday, 21 February 2011, for the President's Day holiday.

Back home, Prime Minister Manmohan Singh is expected to make a statement on the Joint Parliamentary Committee (JPC) on the 2G spectrum scam in Parliament today, 22 February 2011 and a resolution on the JPC will be moved on Thursday, 24 February 2011, as per media reports. The 2G scam, which may have cost the exchequer up to $39 billion in lost revenue, has led to the sacking and arrest of a former minister. The Central Bureau of Investigation raided a television channel owned by the family that runs the DMK last week in connection with allegations that it had been paid $47 million by firms which had benefited from the 2G mobile licence sale. The budget session started yesterday with President Pratibha Patil's speech and will last until 21 April 2011.

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 said on Friday, 18 February 2011, said the government will introduce a legislation on goods and service tax (GST) in the Budget session of parliament beginning 21 February 2011. 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.

Railway Budget will be announced on Friday, 25 February 2011. The Economic Survey will be tabled in the parliament on the same day after the Railway Budget.

Marketmen expect the government to continue thrust on development spending in the Budget. 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. 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.