Advance tax data, RBI policy review in focus

The market is likely to remain volatile as investors react to a slew of economic data and the Reserve Bank of India's (RBI) monetary policy review. Investors will keenly watch data on third quarter December 2011 corporate advance tax payment due on Thursday, 15 December 2011, which may provide cues on Q3 December 2011 results. Interest rate sensitive banking, auto and realty shares will be focus next week ahead of the RBI's monetary policy review on Friday, 16 December 2011.

Data on Monday, 12 December 2011, on industrial production for October 2011 and on Wednesday, 14 December 2011, on headline inflation for November 2011 will provide cues on the central bank's likely policy stance at its mid-quarter monetary policy review on Friday, 16 December 2011. With the liquidity situation becoming tighter and inflation on the decline, the financial markets are expecting a reduction in the cash reserve ratio (CRR) -- portion of bank deposits kept with the RBI -- to ease the money crunch in the banking system. The CRR has been left unchanged at 6% since May 2010.



Industrial production grew 1.9% in September 2011 from a year earlier, far below market expectations, reflecting weakening economic activity due to the central bank's aggressive tightening of monetary policy. The reading was also significantly lower than the revised 3.5% industrial output growth in August.

Inflation, as measured by the wholesale price index (WPI), stood at 9.73% in October 2011, as against 9.72% in September 2011. The annual inflation rate was at 9.7% in August 2011.

The third advance tax installment is due on 15 December 2011, which may provide cues on third quarter corporate earnings. Advance taxes are collected in four installments -- 15% by 15 June; 40% by 15 September; 75% by 15 December and 100% by 15 March.