Market may open lower as crude boils; food inflation data eyed

The market may open lower as crude oil prices held near 2-1/2 year peaks on Thursday as worries about supply disruption persisted given ongoing unrest in Libya. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 71 points at the opening bell. India imports more than 70% of its oil requirement. US crude oil futures were up 38 cents or 0.37% at $102.61 a barrel. Asian stocks were firm.



As per provisional figures, foreign funds bought shares worth Rs 418.51 crore and domestic funds bought shares worth Rs 95.64 crore on Tuesday, 1 March 2011, the the Sensex had 3.5% in post-Budget rally. The stock market was closed on Wednesday, 2 March 2011, on account of Mahashivratri.

The government will unveil data on some wholesale price indices for the year through 19 February 2011 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST.

Tata Steel has reportedly increased its stake in Riversdale Mining, Australia, by close to 3%. The move gives a clear sense that the company has no intention to exit Riversdale anytime soon, putting to rest speculations to the contrary.

Asian stocks edged higher on Thursday, with upbeat US economic data helping to offset worries about surging oil prices caused by turmoil in the Middle East. The key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan rose by between 0.29% to 1.57%.

US stocks eked out gains on Wednesday as the latest data signaled the economy could absorb expected higher energy costs. Economic data was positive, with the Federal Reserve's Beige Book suggesting economic activity picked up in 2011 and a private survey pointing to strong private-sector hiring.

Back home, the manufacturing sector expanded at its fastest clip in three months in February 2011 as more new orders poured in, but input prices rose at a record pace, a survey showed on Tuesday, 1 March 2011. The HSBC Markit Purchasing Managers' Index, based on a survey of around 500 Indian companies, rose to 57.9 in February from 56.8 in January. This was the 23rd consecutive month the key index of manufacturing in Asia's third largest economy has been above the 50 mark that divides growth from contraction.

The output of six key industries expanded 7.1% in January 2011, faster than a downwardly revised growth of 6.1% in December 2010, government data showed on Tuesday, but slower than the 9.1% growth during the corresponding period last year.

Exports in January rose an annual 32.4% to $20.6 billion, while imports for the month rose 13.1% on the year to $28.6 billion, government data released on Tuesday showed.

The gross domestic product (GDP) growth for the third quarter stood at 8.2% in Q3 December 2010 against 8.9% in Q2 September 2010.

The Finance Minister announced in the budget 2011-12 on Monday, 28 February 2011, cut 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). He said while growth in 2010-11 has been broad-based, food inflation continues to remain a concern. Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation. He added that financial sector reforms will move forward with the Insurance amendment Bill, LIC bill and Pension Development Authority Bill in current session.

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 Finance Minister allowed foreign institutional investors (FIIs) to invest in mutual fund schemes and raised limit the FII investment limit in corporate bonds for investment in infrastructure. He said government will introduce Public Debt Management Bill in 2012.

Mukherjee said Indian economy is back to pre-crisis growth trajectory and that economy is set for double-digit growth in coming years. He said government expects average inflation to be down next year. He added current account deficit poses a concern.

The government will spend Rs 1.6 lakh crore on social projects, up 17% from the last year. The finance minister said the government is on course to introduce the food security bill this year. The new Companies Bill will also be introduced he added. He said the economy is resilient to the external shocks. He said removal of supply bottlenecks in the food sector will be in focus in 2011-12.

The finance minister also proposed the issuance of tax-free bonds worth Rs 30,000 crore for infrastructure financing. Mukherjee said the government intends to spend Rs 2.14 lakh crore as budgetary support for the infrastructure sector in 2011-12, which is 23.3% higher than current year.

The Finance Minister re-iterated the Government's resolve to move towards direct transfer of cash subsidy to people living below poverty line in a phased manner. He said that the Nutrient Based Subsidy (NBS) has improved the availability of fertilizers and the Government is actively considering extension of NBS regime to cover urea.

The finance minister raised tax exemption limit on personal tax to Rs 1.8 lakh from Rs 1.6 lakh. For senior citizens, tax exemption limit has increased to Rs 2.5 lakh from Rs 2.4 lakh and the eligibility age for senior citizens will be 60 years against 65 years earlier. The Rs 20000 exemption for investment in infra bonds has been raised by another year.

The projected fiscal deficit for FY 2011 has been revised downwards to 5.1% from 5.5%. The fiscal deficit for FY 2012 has been projected at 4.6%. The projected fiscal deficit for FY 2013 is 4.1%.