High oil prices may cap upside

Market friendly measures announced by Finance Minister Pranab Mukherjee in Union Budget 2011-12 presented on 28 February 2011 may continue to push the market higher. Progress of the peace talks in the Middle East, crude oil price and global market moves will also influence Indian stocks which have witnessed a solid post-Budget rally.



The Finance Minister announced a cut in surcharge on corporate tax on domestic firms to 5% from 7.5% and projected a lower fiscal deficit target of 4.6% for the year ending March 2012 (FY 2012). The Finance Minister said Goods and Services Tax (GST) bill will be introduced in this session of parliament and that the new Direct Tax Code will be implemented from 1 April 2012.

The Central Statistical Organisation (CSO) unveils industrial production data for January 2011 on Friday, 11 March 2011. Industrial production growth eased to a 22-month low of 1.6% in December 2010 from an upwardly revised growth of 3.6% recorded in November 2010.

High crude oil prices remain a cause for concern for India which imports 70% of its crude oil requirements. US crude futures were above the $100 a barrel mark on unrest in the Middle East and North Africa. There are concerns that a pro-democracy movement could spread to large-scale oil producer Saudi Arabia.

The Reserve Bank of India is seen raising interest rates by 25 basis points at a mid-quarter policy review on 17 March 2011 to tame inflation.

Flow of funds will be closely watched. Foreign institutional investors (FIIs) outflow in the calendar year 2011 totaled Rs 9000.70 crore (till 1 March 2011). They had offloaded equities worth Rs 4585.50 crore in February 2011 and Rs 4813.20 crore in January 2011 after buying equities Rs 133266 crore in the calendar year 2010.

On the other hand, mutual funds had bought equities worth a net Rs 1427.10 crore in February 2011 and Rs 590.80 crore in January 2011.