Weather cool, Politics hot!

It doesn't matter if the water is cold or warm if you're going to have to wade through it anyway - Teilhard de Chardin.

Mercury has dipped across the country, especially in North India, but the political heat is all set to escalate. The showdown between Team Anna and the Government is likely to continue as Anna Hazare begins his three-day agitation in Mumbai. The Parliament will also resume the winter session to debate the New Lokpal Bill.

The Centre could find it tough to pass the Bill given the opposition to several clauses. Also, it doesn’t seem to have the requisite numbers in the Rajya Sabha. A host of Opposition amendments await the Government as it seeks to get the Lokpal Bill passed in Parliament over the next three days.



The start is likely to be a sedate one. Barring a few, most world markets were shut on Monday on account of extended Christmas holiday. Markets open for trading in Asia are nearly static in quiet trading. Interest from most participants may be waning as the disappointing 2011 draws to a close. However, with the F&O expiry scheduled for Thursday, derivative traders still have something at stake.

The good news is that the infrastructure growth picked up pace in November after a dismal October. For the November IIP data, which is expected to be better, one will have to wait till January 12. The latest WPI inflation report will also be very important ahead of the RBI policy meeting in late January.

Indian markets started the new trading week with strong gains, with the NSE Nifty surpassing Friday’s peak of 4763. The real challenge for the Nifty is in moving above 4850, which could point to a possible change in intermediate trend. The Nifty could be headed to 5040 if it surpasses 4850.

Japan is poised to unveil a currency-swap line with India. The deal is likely to be unveiled during a trip by Prime Minister Yoshihiko Noda to India that starts today.

The Government will sell Rs 150bn of bonds on December 30 in an unscheduled auction to partially offset a Rs 40bn auction cancelled last month and to fund an emerging cash requirement, the finance ministry said on Monday. The move could unsettle markets amid growing concerns about the bloated fiscal deficit.

The Government is widely expected to miss its target of paring its deficit to 4.6% of GDP in the year ending March.

Liquidity in the banking system remained tight on Monday with banks borrowing ~Rs 1.43 trillion from the RBI's repo window, significantly more than the central bank's comfort level of around Rs 600bn.

The benchmark 10-year government bond yield, which closed at 8.49% on Monday before the auction announcement, is expected to open few basis points higher.

Separately, the RBI has tightened rules, including capital adequacy, for the non-banking finance companies (NBFCs).

The Telecom Commission has accepted industry regulator TRAI's recommendations to relax rules for Mergers and Acquisitions in the sector and allow spectrum-sharing among telcos, paving the way for consolidation in the multi-layer market.

Reliance and ADAG shares could be in focus amid reports of growing warmth in the relations between the two Ambani siblings.

The Government is likely to grant conditional approval to Reliance Industries to develop four satellite fields in the KG basin, according to reports.

The Delhi government on Monday agreed to infuse equity worth Rs 5bn into private distribution companies BSES Rajdhani and BSES Yamuna to bail them out of a liquidity crisis. The bailout is conditioned on the discoms' private owners, ADAG, matching it in accordance with their shareholding.

Trading across global markets will be muted this week. Italy’s last bond auction of the year will be in focus after yields topped the dangerous 7% mark on Friday. Markets will also be watching France for any news related to a potential downgrade for the nation.

Spain's new prime minister is expected to give more details about the government's plans to reduce the country's budget deficit. In the US this week, markets will focus on the housing market reports along with data on the manufacturing sector and consumer confidence.

FIIs were net buyers of Rs 1.1.3bn (provisional) in the cash segment on Monday, according to NSE data. The domestic institutional investors (DIIs) were net sellers of Rs 1.18bn on the same day.

The foreign funds were net buyers of Rs 3.95bn (provisional) in the F&O segment on Monday, NSE data shows.

FIIs were net buyers at ~Rs 2.72bn in the cash segment on Friday (Dec. 23), according to SEBI web site.