Market may extend Thursday's losses on weak Asian stocks

The market may extend Thursday's (8 December 2011) 2.3% losses on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 51.50 points at the opening bell.

Key benchmark indices tumbled on Thursday, 8 December 2011, after a newspaper report suggested that industrial output declined by 7% in October 2011, falling for the first time since June 2009. The 50-unit S&P CNX Nifty fell the psychological 5,000 mark. The BSE Sensex lost 388.82 points or 2.3% to settle at 16,488.24, its lowest closing level since 1 December 2011.



Foreign institutional investors (FIIs) bought shares worth Rs 25.72 crore on Thursday, 8 December 2011, as per the provisional data from the stock exchanges. FIIs have bought shares worth Rs 1591.97 crore so far in this month, as per the data from the stock exchanges.

The third advance tax installment is due on 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.

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.

Food inflation in India slid further in the fourth week of November, falling under the 7% mark, data released by the Government showed on Thursday. Fuel inflation remained steady. Food inflation declined to 6.6% in the week ended November 26 from 8% in the preceding week, the Commerce & Industry Ministry said on Thursday. Food inflation stood at 8.93% in the corresponding week last year. Inflation in the Primary Articles group fell to 6.92% in the week under review, from 7.74% in the week ended November 19, according to the Commerce Ministry statement. It was at 14.01% in the year-ago period. Inflation in the Fuel & Power group stood at 15.53% in the week ended November 26, unchanged compared to the previous week, the latest data showed. It was at 10.07% in the comparable week of the previous year.

Easing food inflation could nudge the central bank to reverse its tight monetary policy stance as economic growth is stuttering. Food inflation has been a key driver of headline inflation in India over the past few years.

Data due 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 16 December 2011.

Industrial production is seen falling 0.6% in October 2011 as per the median estimate of a total of 14 economist polled by Capital Market. The last time the industrial production had reported a decline was way back in June 2009. Industrial production grew 1.9% in September 2011.

Inflation based on the wholesale price index (WPI) is projected to ease to 9% in November 2011, as per the median estimate of the poll carried out by Capital Market. Inflation, as measured by the wholesale price index (WPI), stood at 9.73% in October 2011 and 9.72% in September 2011.

The Indian economy expanded at a substantially lower rate in the second quarter of the current fiscal year as a series of rate increases by the RBI and a global slowdown hurt local demand. India's economy grew 6.9% in Q2 September 2011, in line with expectations, after expanding by 7.7% in the first quarter, government data showed on 30 November 2011. The manufacturing sector grew an annual 2.7% during the July-September quarter while farm output rose an annual 3.2% the data showed. India's GDP growth in the first six months of FY 2012 stood at 7.3% versus 8.6% in the corresponding period of the last financial year, the CSO data showed on 30 November 2011.

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 merchandise exports in October rose by 10.8% to $19.87 billion, while imports during the same month climbed by 22% to $39.51 billion, data released by the government showed on 1 December 2011. As a result, the trade deficit for October 2011 stood at $19.64 billion versus $14.53 billion in the corresponding month a year earlier.

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 unveils mid-quarter monetary policy review on 16 December 2011.

Asian stocks fell for the second day in a row on Friday, 9 December 2011, after the European Central Bank on Thursday, 8 December 2011, damped speculation it would step up debt purchases. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.54% to 1.76%.

China's annual inflation rate tumbled in November to 4.2% the lowest level in more than a year, fuelling expectations of further monetary policy easing to combat deteriorating domestic and international economic conditions.

US stocks fell on Thursday after the European Central Bank chief dashed hopes for more bond buying to support the euro zone.

The European Central Bank (ECB) took new measures Thursday to bolster the continent's ailing economy while dampening expectations that it would escalate its efforts to help struggling European governments borrow money at affordable rates. The ECB cut interest rates by a quarter percentage point and announced a program to make it easier and cheaper for cash-strapped banks to borrow money from the central bank. ECB President Mario Draghi said he did not necessarily signal the central bank would increase government bond purchases when he spoke last week, adding that the program was not eternal or infinite.

The ECB said it would offer further liquidity measures to help ease the region's debt crisis, but Draghi said "the outlook remains subject to high uncertainty and substantial downside risks." Draghi also said that the ultimate decisions and political responsibility are in the hands of European Union leaders, which will wrap up a key summit in Brussels later in the global day today, 9 December 2011. The two-day summit is billed as crucial for the debt-stricken region.

The European Union has reportedly failed to secure backing from all 27 members on treaty changes to more closely coordinate fiscal policy within the bloc. Any change to the treaty would now be enacted among the 17 euro zone nations and others that want to join, according to a report.