Market may extend losses on weak Asian stocks; Q3 advance tax numbers eyed

The market may extend losses tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 59.50 points at the opening bell. On the macro front, the government will today, 15 December 2011, unveil data on some wholesale price indices viz. the food price index, the primary articles index and the fuel price index for the year through 3 December 2011.

The third advance tax installment is due today, 15 December 2011, which may provide cues on Q3 December 2011 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.



Key benchmark indices dropped in choppy trade on Wednesday, 14 December 2011 as higher-than-expected inflation reading for November 2011 dashed hopes that the Reserve Bank of India (RBI) will advance a rate cut to early next year to stimulate the economy. Data showing selling by foreign funds recently and weak European shares also dampened sentiment. The BSE Sensex lost 121.37 points or 0.76% to settle at 15,881.14, its lowest closing level since 12 December 2011.

Foreign institutional investors (FIIs) sold shares worth Rs 140.13 crore on Wednesday, 14 December 2011, as per the provisional data from the stock exchanges. FII outflow totaled Rs 1377.80 crore in four trading sessions from 9 to 14 December 2011, as per provisional data from the stock exchanges. The recent outflow followed sustained inflow early this month.

IT stocks will be in focus as the rupee hit yet another record low on Wednesday as worse-than-expected inflation data and the U.S. Fed's decision to hold back on new stimulus steps heightened fears that capital outflows from emerging economies such as India could accelerate. The rupee closed at 53.71/72 to the dollar after briefly hitting an all-time low of 54, which represented a drop of 3.7% from its close last Friday. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports. However, a weak rupee will adversely affect PSU OMCs and airline companies.

PSU OMCs and oil explorations firms will be watched as oil traded near the lowest price in more than five weeks in Asian electronic trading today after OPEC raised its output ceiling and Europe's debt crisis worsened, threatening a recession that may curb demand for commodities. Futures were little changed after dropping yesterday the most since September after members of the Organization of Petroleum Exporting Countries meeting in Vienna agreed to raise their output target to 30 million barrels a day. Crude for January delivery yesterday slid 5.2 percent to $94.95, the lowest close since November 4.

Credit rating agency Moody's Investors Service on Wednesday, 14 December 2011, said that the sharp decline in the value of the Indian rupee against the dollar is generally exerting only a moderate impact on rated Indian companies. Risks for companies holding large amounts of dollar denominated debt are also manageable in the near term, given that debt maturities are limited for this time frame, Moody's said in a new report. This means Indian companies rated by Moody's do not have a significant dollar outflow at a time when the Indian rupee is losing ground. Moody's latest assessment comes as the local currency continued its recent steep slide, recording a new all-time low against the dollar for a third straight day Wednesday, 14 December 2011.

A government statement in parliament last month dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam has said that the government has no proposal to lower the securities transaction tax (STT). There has been a speculation that the government will reduce STT in Union Budget 2012-2013 in a bid to revive sagging volumes on the bourses. Palanimanickam said in a written reply to Rajya Sabha that the securities transaction tax receipts had declined by around 18% to Rs 2960 crore during the first six months in the current fiscal year from a year ago period.

The annual inflation declined in November 2011 from the previous month but remained above the 9% mark, data released by the government showed on Wednesday. Inflation, as measured by the wholesale price index (WPI), was at 9.11% in November as against 9.73% in October, the Union Commerce & Industry Minister said Wednesday. Inflation figure for September 2011 was revised upwards to 10% from initial estimate of 9.72%.

Chief economic adviser Kaushik Basu on Wednesday, 14 December 2011, said that he expects food inflation to drop to 3% within a month. His comments came before the announcement of the monthly inflation data for November 2011.

Industrial production shrank 5.1% in October versus 11.3% growth in the same period a year earlier, data released by the Commerce Ministry showed on Monday, 12 December 2011. It was the first decline in industrial production in more than two years. Industrial output last fell in June 2009, when it shrank 1.8%. Manufacturing output, which has a 75.5% weight in the index of industrial production, fell 6% from a year earlier in October, compared with a 2.4% rise the previous month. Mining output shrank 7.2%, after falling 5.6% in September. September's industrial production growth was revised upwards marginally to 2%, from 1.9% earlier.

The government last week cut its economic growth forecast to 7.25%-7.75% from the previous 8% for the current year through March 2012 (FY 2012), and it also warned of possible fiscal slippage caused by global uncertainties. In a mid-year economic review presented in parliament on Friday, 9 December 2011, the finance ministry said that commitments on account of additional requirement on various subsidies will make it difficult to adhere to the total expenditure target for the current year. However the government promised to keep the slippage to a minimum as it broadly adheres to its long-term fiscal rigor, the report added. The government had pegged fiscal deficit at 4.6% of gross domestic product when it presented the Union Budget 2011-2012 in February 2011.

The reduction in GDP growth forecast for FY 2012 comes after the economy grew an annual 6.9% in the quarter ending September 2011, its slowest pace in more than two years. The government said headline inflation would decline from December 2011, expecting it to ease to 7% by March 2012.

The government also said that the Rs 40000-crore stakes sale target in state-run companies would be hard to achieve this fiscal year, while tax receipts would suffer from the impact of the global slowdown. The government is considering options other than share sales to meet its divestment target in state-run companies for the fiscal year ending March, the junior finance minister said on Friday.

India's manufacturing sector expansion slowed in November as factory output grew at its slowest pace in nearly three years although export demand should provide some cheer for factories, a survey showed on 1 December 2011. The HSBC Markit India Manufacturing PMI fell to 51 in November from 52 in October, but has stayed above the 50 mark that divides growth from contraction for 32 months. The PMI was 50.4 in September.

On the flip side, India's services sector expanded in November for the first time in two months as new business accelerated despite persistent inflationary pressures, a survey showed on Monday. The seasonally adjusted HSBC Markit Business Activity Index -- based on a survey of around 400 firms -- stood at 53.2 in November, above the 50-mark that separates growth from contraction. It had fallen to 49.1 in October after contracting for the first time in more than two years in September to 49.8. Despite tight monetary conditions, the sub-index for new business accelerated to 52.3 in November from 51 in October, driving the turnaround in the service sector.

India's November exports are seen at $22.3 billion while imports for the month are seen at $35.9 billion, leaving a trade deficit f $13.6 billion, Trade Secretary Rahul Khullar told media reporters on Friday. Exports between April and November are seen up 33.2 percent from a year earlier to $192.7 billion, Khullar said, citing provisional data.

The Reserve Bank of India (RBI) announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably. RBI will anoounce monetary policy review tomorrow, 16 December 2011.

Three key Bills relating to judicial accountability, protection of whistle blowers and Citizens Charter, which Anna Hazare wanted to be brought under the Lokpal, were passed by the Union Cabinet on Tuesday. The Judicial Standards and Accountability Bill, 2010, Public Interest Disclosure and Protection to Persons Making the Disclosures Bill, 2010, widely known as the Whistleblowers' Protection Bill and Citizens' Charter and Grievance Redressal Bill 2011, were passed by the cabinet. However, the Union Cabinet has deferred a decision on an ambitious Food Security Bill. The food security program promises to give cheap food grains to 63.5% of the country's 1.2 billion population. It would guarantee seven kilograms of wheat, rice and coarse grains to each member of a poor family every month, and at least three kgs to those who are slightly better off. The grains would be supplied to the poor at a subsidized price of three rupees/kg for rice, two rupees/kg for wheat and one rupee/kg for coarse grains.

Asian stocks fell for a third day on Thursday as a survey showed sentiment among Japan's largest manufacturers deteriorated and growing funding stress in Italy stoked concern Europe is losing its fight to contain the debt crisis. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 1.32% to 2.32%.

U.S. stocks sank for a third straight day on Wednesday as investors confronted a drop in the euro and steep declines in commodity prices.

Italy sold the maximum targeted amount of five-year bonds, but was forced to pay a euro-era high average yield of 6.47% to do so, above the 6.29% paid at the previous auction last month. The country's 10-year bond yield rose back above the key 7% level, to 7.169%. Spain, Italy and France all saw their government bond yields widen over German bunds.