Market may open lower on weak Asian stocks; food inflation data eyed

The market may open lower tracking weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 16 points at the opening bell. On the macro front, the government will today, 8 December 2011, will 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 26 November 2011.

Key benchmark indices edged higher in a volatile trading session on Wednesday, 7 December 2011, on positive global cues. Both Sensex and Nifty ended at their highest closing levels since 15 November 2011. The BSE Sensex rose 71.73 points or 0.43% to settle at 16,877.06, its highest closing level since 15 November 2011.



Foreign institutional investors (FIIs) bought shares worth Rs 135.36 crore on Wednesday, 7 December 2011, as per the provisional data from the stock exchanges. FIIs have bought shares worth Rs 1566.25 crore so far in this month, as per the data from the stock exchanges.

A government statement in parliament has dashed hopes of a relief in securities transaction tax (STT). Junior finance minister S.S. Palanimanickam, last month, 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 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.

The output of the eight infrastructure industries dropped to an over six-year low of 0.1% in October 2011, data released on 30 November 2011 showed, suggesting further slowdown in already wobbly industrial growth. The eight infrastructure industries together have a 38% weight in the index of industrial production (IIP), which makes the infrastructure index a good leading indicator of industrial production.

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.

Food inflation tumbled in the third week of November but fuel inflation increased marginally, data released by the government showed on Thursday, 1 December 2011. Food inflation declined to 8% in the week ended November 19 from 9.01% in the preceding week, the Commerce & Industry Ministry said. Food inflation stood at 9.03% in the corresponding week last year.

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 dropped on Thursday ahead of a European summit on the region's sovereign debt crisis, and as economic data from Japan and Australia signaled the global economy is slowing. Key benchmark indices in China, Hong Kong, Indonesia, Japan, Singapore, South Korea and Taiwan fell by between 0.6% to 1.76%.

Investors await results of meetings this week of the European Union and European Central Bank (ECB). The idea of a much stronger bailout fund will be proposed along with the plan on revising existing treaties to strengthen budget rules across the euro area when leaders from 27 European Union countries meet tomorrow, 9 December 2011.

Meanwhile, the ECB is likely to reduce its benchmark rate to 1% from 1.25% at a policy meeting later in the global day today, 8 December 2011.

US stocks were little changed in choppy, light trading on Wednesday as investor reacted to reports from Europe ahead of that region's summit of leaders to discuss the 2-year old euro-zone sovereign debt crisis