Market seen opening subdued on weak global cues

The market is likely to open lower tracking nervousness in world markets caused by continued political turmoil in Libya. US stocks declined sharply on Tuesday, 22 February 2011. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 27.50 points at the opening bell. Crude oil prices surged to the highest in more than two years in London on concern the Libyan turmoil may disrupt supplies. The near term market trend will be dictated by the expectations and announcements made in the Railway Budget and Union Budget 2011-12 scheduled on 25 and 28 February 2011, respectively.



Stocks may remain volatile in the near term ahead of the expiry of the near-month February 2011 derivatives contracts on Thursday, 24 February 2011.

Meanwhile, as per reports an empowered panel of ministers will meet shortly to decide if fuel prices should be raised, and by how much as global crude oil price surged to multi-year high. Brent crude for April 2011 settlement on the London-based ICE Futures Europe exchange climbed by $3.22 to $105.74 a barrel on Tuesday, the highest since 22 September 2008.

As per provisional figures, foreign funds sold shares worth Rs 386.26 crore and domestic funds bought shares worth Rs 413.99 crore on Tuesday, 22 February 2011.

Index heavyweight Reliance Industries may see action on reports Niko Resources can increase its stake in oil and gas blocks operated by Reliance Industries in India by 30% of its current holdings after the Indian company formed a partnership with BP Plc.

Maruti Suzuki will reportedly supply its latest compact car A-Star to Volkswagen AG. The car, which will undergo some modifications and design changes, will be sold in India and Asian markets under a new brand.

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.

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.

Asia stock prices declined on Wednesday as concern mounted that instability in the Middle East and North Africa may derail a global recovery. The key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan fell by between 0.04% to 0.67%.

US stock markets plummeted Tuesday in its biggest drop of the year as escalating tensions in the Middle East and North Africa sent oil prices soaring. The Dow Jones Industrial Average tumbled 178.46 points, or 1.4%, to 12212.79, its biggest point and percent drop since 16 November 2010. The Standard & Poor's 500-stock index fell 27.57 points, or 2.1%, to 1315.44 and the Nasdaq Composite sank 77.53 points, or 2.7% to 2756.42.

Libyan leader Col. Moammar Gadhafi publicly defied protesters seeking to end his rule, vowing to remain in the country "until the end" in a televised speech that showed his determination to cling to power Tuesday, as reinforcements of loyal armed military units tightened their hold around the capital.

Back home, 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.

The Prime Minister Manmohan Singh said in parliament on Tuesday that the country cannot afford to stall parliament and said he is committed to root out corruption. He said government will set up a Joint Parliamentary Committee (JPC) to probe 2G telecom scam. 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 of parliament began on Monday, 21 February 2011, with President Pratibha Patil's speech and will last until 21 April 2011.

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.

The key benchmark indices edged lower in choppy trade on Tuesday as macroeconomic worries arising from surging crude oil prices and geopolitical tensions due to crisis in Libya weighed on the sentiment. The BSE 30-share Sensex fell 142.15 points or 0.77% to 18,296.16 and the S&P CNX Nifty fell 49.40 points or 0.9% to 5,469.20.