Market may open higher on firm Asian stocks

The market may edge higher in early trade on firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 24.50 points at the opening bell. Asian stocks gained on Friday, 15 June 2012, on reports that the major central banks around the world are considering bolstering liquidity support in the event that the Greek election goes badly this weekend. HDFC said its management completely disagrees with the contents of the Macquarie report dated 14th June 2012 as the concerned analyst has not attempted to meet anyone from HDFC before making the aforesaid report and verify the facts and statements made therein. Moreover it is surprising that Macquarie in its report as recently as May 7, 2012 had put a price target of Rs.775 on HDFC stock with an outperform rating based on the same facts and figures, HDFC said in a statement. "We are therefore unable to understand as to what prompted the analyst to change his recommendation and outlook within a months time", HDFC said. The point that has been raised in the Macquarie report regarding the adjustment for Zero Coupon Bonds is not new and has been clarified on several occasions by HDFC to its investors. HDFC said it is both a housing finance company and is also a financial holding company. As a financial holding company, HDFC has been making investments in its subsidiaries and associates viz. HDFC Bank, HDFC Standard Life Insurance Company, HDFC ERGO General Insurance Company, HDFC Asset Management Company Ltd etc, HDFC said. Under the Indian GAAP, the accounts of HDFC are presented on a standalone basis wherein only the dividend received from subsidiaries and associates are included as part of the income and its true share of profit in its subsidiaries and associates is not considered as part of HDFC's profits. HDFC has made its investments in subsidiaries and associates out of the amounts borrowed by way of Zero Coupon Debentures and therefore the interest cost on such borrowings amounting to Rs 485 crores during the year 2011-12 (net of tax) has been charged to Securities Premium account as per Section 78 of the Companies Act, HDFC said. For the year ended March 31, 2012, if the proportionate share of profits of HDFC in its subsidiaries and associates is considered, the profits of HDFC will be higher by Rs 1340 crores after reducing the dividends received from the subsidiaries and associates. Under these circumstances if the aforesaid interest cost on Zero Coupon Debentures is charged to profit and loss account, HDFCs profits would still be higher by Rs 855 crore, HDFC said. Further as and when IFRS is made applicable under Indian GAAP, the overall profits will go up further as some of the expenses on borrowings and loan sourcing will require to be amortized instead of currently being fully charged to the Profit and Loss account in the year of payment, HDFC said. Further, the one-time provisioning requirements in respect of standard assets is not reflected in profit and loss account as it relates to all the past assets and is transitory in nature, HDFC said. The interest rates on retail home loans are lower on account of lower risk weights, lower NPAs and also diversified risk profile, HDFC said. Data on first installment of the advance tax payment due today, 15 June 2012 could provide cues on Q1 June 2012 corporate earnings. Housing finance major HDFC announces Q1 June 2012 results on 11 July 2012. Key benchmark indices snapped two-day winning streak on Thursday, 14 June 2012, as the latest data showed inflation accelerating in May 2012 and after the government revised upwards inflation for March 2012 to 7.69% from a provisional reading of 6.89%. The BSE Sensex was down 202.63 points or 1.2% to 16,677.88, its lowest closing level since 11 June 2012. Foreign institutional investors (FIIs) bought shares worth a net Rs 105.08 crore on Thursday, 14 June 2012, as per provisional figures from the stock exchange. Inflation based on the wholesale price index (WPI) accelerated to 7.55% in May 2012 from a year earlier as prices of manufactured products and fuel increased, adding to concerns of a rise in price pressures. Inflation was at 7.23% in April 2012. The government also raised WPI inflation reading for March 2012 to 7.69% from 6.89% reported earlier. Core inflation, or non-food manufacturing inflation, was below 5% in May 2012, far lower than the headline reading. Inflation in India has moderated from 10% in September 2011, but still remains above the central bank's comfort level. The central bank undertakes a mid-quarter monetary policy review on 18 June 2012. The RBI aims to contain inflation expectations below 4.5%. The government on Thursday, 14 June 2012, raised the minimum support prices of various kharif (June-October) crops 2012 in the range of 15.3% to 53.1%, which is expected to further fuel persistently high food inflation in the coming months. Food inflation has been in double digits for around a year and has been contributing significantly to overall inflation. Easing of core inflation, falling crude oil prices, weak industrial production data for April 2012, sharp deceleration in GDP growth in Q4 March 2012 and latest data showing decline in exports in May 2012 have raised expectations that the central bank will cut interest rates to revive economic growth. Market men expect a 25 basis points reduction in repo rate by RBI at its mid-quarter policy review on Monday, 18 June 2012. The country's crucial monsoon rains were 50% below average in the week to June 13, the weather office said on Thursday, a second week of scant rain and confirmation the four-month season has got off to a slow start. The India Meteorological Department (IMD) has forecast average rainfall for the whole June to September season -- the third year in a row to avoid a drought. The monsoon rains are important for farm output and economic growth as about 55% of the south Asian nation's arable land is rain-fed, and the farm sector accounts for about 15% of a nearly $2-trillion economy. Global rating agency Standard & Poor's on Monday warned that India could become the first BRIC nation to lose its investment-grade rating if the South Asian country doesn't revive its growth and push the pedal on reforms. Setbacks or reversals in India's path toward a more liberal economy could hurt its long-term growth prospects and therefore its credit quality, Joydeep Mukherji, S&P's credit analyst, stated in a report titled 'Will India Be the first BRIC Fallen Angel?'. S&P currently rates India BBB-minus, just one notch above junk. The other three BRIC group of emerging nations--Brazil, Russia and China--are also rated investment-grade. S&P had in April this year cut the outlook on India's long-term credit rating to negative from stable and warned that the country could lose its investment-grade status if the government fails to bring its fiscal house in order. Data released on 31 May 2012 showed India's economic growth slowed to its weakest pace in nine years in the January-March quarter, when it expanded 5.3% from a year earlier. For the fiscal year ended March 31, the economy grew 6.5%, below the 6.9% expansion the government had projected. US Treasury Secretary Timothy Geithner will meet India's finance minister in Delhi in June to strengthen economic and financial ties between the two countries, the US Treasury Department said early this week. Asian stocks traded higher in choppy trade on Friday, as investors weighed expectations of policy easing ahead of this weekend's crucial election in Greece. Key benchmark indices in China, Hong Kong, Japan, Taiwan, Singapore and Indonesia rose by between 0.31% to 1.11%. South Korea's Kospi fell 0.56%. Moody's Investors Service on Friday cut the long-term debt and deposit ratings for five Dutch banks, citing expected difficult operating conditions for 2012, as well as the downside risks to the economic outlook and fragile investor confidence in Europe. The long-term ratings of Rabobank Nederland, ING Bank N.V., ABN Amro Bank N.V., LeasePlan Corporation N.V. and SNS Bank N.V. were all downgraded. Moody's assigned stable outlooks to four of the firms but gave ING Bank, a unit of ING Groep N.V. a negative outlook. Greek voters return to the polls on 17 June 2012 after the splintered results of a May 6 parliamentary election left no party able to put together a government. The poll could potentially decide whether the nation will remain in the euro zone. A key summit of the European Union is scheduled on 28 and 29 June 2012 to discuss the ongoing European debt crisis. US stocks jumped Thursday after media reports signaled possible central-bank action and economic data added to the case for further moves by the Federal Reserve to bolster growth. On Thursday, the government said first-time applications for jobless benefits rose by 6,000 to 386,000 last week and consumer prices in May fell 0.3%, the sharpest drop in roughly three years. The Federal Open Market Committee holds its next policy meeting on June 19-20. It remains to be seen if the Fed extends Operation Twist -- a plan expiring this month that lengthens the average duration of bonds in the Fed's portfolio. The Fed launched Operation Twist in September 2011 to lower long-term borrowing costs. As expected, the Organization of the Petroleum Exporting countries (OPEC), which supplies about 40% of the world's crude left its collective production ceiling unchanged on Thursday. The OPEC would need to reduce output by 1.6 million barrels a day to comply with its targeted ceiling, Secretary-General Abdalla El-Badri said. The 7th Group of 20 industrial and developing nations summit is scheduled to be held in Los Cabos, Mexico on 18 and 19 June 2012 to discuss current affairs such as poverty, youth unemployment and environmental issues. The leaders are also likely to discuss the ongoing European debt crisis.