Market may extend recent losses on weak Asian stocks

Market may extend recent losses on weak Asian stocks The market may extend recent losses on weak Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 6.50 points at the opening bell. The market may remain volatile today, 30 August 2012, as traders roll over positions in the futures & options (F&O) segment from the near-month August 2012 series to September 2012 series. The August 2012 derivatives contracts expire today, 30 August 2012. Asian stocks traded lower Thursday, as weak data from Japan and declining commodity prices put pressure on major markets a day ahead of a much-awaited speech from U.S. Federal Reserve Chairman Ben Bernanke. Sesa Goa said it received directions from Goa State Pollution Control Board (GSPCB) to stop the activity of the metallurgical coke plant (Expansion) due to two incidents of soot emissions owing to misfiring by two high capacity burners during commissioning of second battery of its metallurgical coke plant (Expansion) on August 17 & 18, 2012. The company has intimated GSPCB that the root cause of the soot emissions were immediately addressed and necessary corrective actions have already been taken. Sesa remains committed to maintain highest standards of environmental safeguards andregrets the incident, it said. M&M will be in focus as the central government has reportedly approved a Rs 23000 crore plan to spur electric and hybrid vehicle production over the next eight years, setting itself an ambitious target of 6 million vehicles by 2020. M&M manufactures Mahindra Reva, India's only electric-focused carmaker. Key benchmark indices fell for the fourth trading session to hit their lowest level in over three weeks on Wednesday, 29 August 2012 after Reserve Bank of India (RBI) governor D Subbarao maintained his hawkish tone in a speech delivered in the US on Tuesday, 28 August 2012. Euro zone debt worries also weighed on sentiment. The BSE Sensex lost 140.90 points or 0.80% to settle at 17,490.81 on that day, its lowest closing level since 6 August 2012. FIIs have made sustained purchases of Indian stocks this month. Foreign institutional investors (FIIs) bought shares worth net Rs 143.29 crore on Wednesday, 29 August 2012, as per the provisional data from the stock exchanges. Their inflow into the secondary equity market totaled Rs 6511.80 crore during 18 trading sessions from 1 to 28 August 2012, as per data from Securities & Exchange Board of India (Sebi). The inflow this month comes on the top of substantial purchases last month. FIIs bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. Subbarao on Tuesday said India's inflation is still a challenge, but its growth story remains intact. "India has no space for a policy response to a crisis, we are more vulnerable," Subbarao said at an event in Cornell University in the United States. The country, he said, had room to react through monetary policy to the 2008-09 crisis, but this time around a litany of challenges--including moderating growth, persistent and high inflation, stress on balance of payments and twin deficits in the country's current account and fiscal budget--have left the central bank little room to negotiate the global slowdown. He noted that despite the depreciation of the Indian rupee by nearly 20% since last August, there has been no improvement in the country's current account deficit. He blamed the government's policy of fuel subsidies for protecting consumers from the effect of global commodity price rises. He noted despite higher prices, imports of oil into the country continue to increase due to rise in consumption, as consumers are protected from these price hikes. He added investors still should be confident of India's growth story and look at the positives including its attractive demographics, its growing middle-class and high savings rate. But he acknowledged there was a lot left to be done by various stakeholders to make the growth story happen. "India needs to grow at 10% for the next 15 years just to catch up," he said. RBI last cut rates by 0.5 percentage point to 8% from 8.5% in April, its first move to reverse a 20-month rate-tightening cycle. It then held rates steady in June and at its last rate-setting meeting on July 31, saying that a cut would exacerbate inflationary pressures. The RBI is scheduled to undertake a mid-quarter review of the monetary policy on 17 September 2012. A late pick-up in monsoon rains this month will lead to a recovery in yields in summer-sown crops including rice and oilseeds, lessening the severity of a drought in several parts of the country following scanty rains for much of this year's June-September monsoon. Prolonged rains would also improve the prospects for winter-sown crops due to better soil moisture. An El Nino weather event, which usually disrupts rainfall, is expected to emerge at the tail-end of the monsoon in September. Farm Secretary Ashish Bahuguna Wednesday, 29 August 2012, said the El Nino may not impact rainfall in September due to build-up of another weather phenomenon called the Indian Ocean Dipole. Rice sowing has picked up this month following revival of monsoon rains. According to data released by the Ministry of Agriculture, rice was sown in a total area of 329.19 lakh hectare (lh) until 24 August 2012, compared with 307.76 lh as on 17 August 2012. Rice sowing so far has already exceeded the normal area of 318.83 lh for the summer sown crop by this time of the year. Cumulative sowing of oilseeds has also exceeded the normal area by this time of the year. Cumulative sowing of oilseeds totaled 164.29 lh until 24 August 2012, compared with 160.77 lh as on 17 August 2012. Sowing of oilseeds so far has already exceeded the normal area of 163.80 by this time of the year. Sowing of cotton totaled 111.53 lh till 24 August 2012, compared with 110.26 lh until 17 August 2012. The normal cotton sowing area of 105.75 lh for the cotton crop by this time of the year has already been surpassed. Cumulative sowing of coarse cereals totaled 165.34 lh till 24 August 2012, compared with 157.97 lh until 17 August 2012. Sowing of coarse cereals remains lower than 194.24 lh of normal area for the crop this time of the year. Sowing of pulses totaled 88.30 lh till 24 August 2012, compared with 85.32 lh until 17 August 2012. Sowing of pulses remains lower than 99.38 lh of normal area for this time of the year. Sowing of jute and mesta totaled 8.78 lh until 24 August 2012, compared with 8.77 as on 17 August 2012. Sowing of jute and mesta remains lower than 9 lh of normal area for this time of the year. Rainfall up to 22 August 2012 was 14% below normal, reflecting a significant improvement from 29% below normal at end-June and 19% below normal at end-July. In area-wise distribution, 55% area of the country received excess/normal rainfall. Remaining 45% area received deficient/scanty rainfall. The monsoon rains--which make up around 70% of India's annual rainfall--are crucial to the nation's agriculture sector and broader economy. More than 60% of the country's farmland is rain-fed. The timing, distribution and quantity of rainfall are all important for crops. The four-month southwest monsoon season that starts from June accounts for almost 70% of total annual moisture that Indian soil receives in a year. Finance Minister P. Chidambaram on Tuesday, 28 August 2012, said that the proposed direct-tax code (DTC) may require a fresh look. The DTC, which aims to simplify tax procedures and improve compliance, was placed in parliament more than a year ago, and the government had earlier said it would implement it on April 1, 2013. The DTC has already undergone several changes. Mr. Chidambaram also said tax laws needed to be friendly but firm. "We are not going to be regarded as a hounding tax administration," he told reporters after a meeting with tax officials on Tuesday. Mr. Chidambaram said the government will be able to achieve its indirect tax revenue target of Rs 5.05 lakh crore for the current fiscal year that began April 1. Meeting the target is crucial for the government, which is struggling to control its fiscal deficit as heavy spending is straining its finances. Weakening tax revenue amid a sharp slowdown in the economy has put further stress on the government's financial health. Authorities will also begin a campaign to improve compliance to tax laws and widen the service tax net, Mr. Chidambaram said. Prime Minister Dr. Manmohan Singh early this week denied allegations of impropriety in coal-block allocations and termed "clearly disputable" the Comptroller and Auditor General of India's (CAG) observations that the process followed to allot them deprived the government billions of dollars in revenue. In its report on the allocation of coal blocks, CAG said the government lost a maximum of Rs 1.86 lakh crore by allocating licenses for 57 coal-mining blocks between 2004 and 2011 to state-owned and private companies without a transparent auction. Dr. Singh said the CAG's calculation of about Rs 1.86 lakh crore of financial gain to private parties can be questioned on a number of technical points. Dr. Singh also said since that the coal blocks were allocated to private companies only for captive purposes for specified end-uses, it will not be appropriate to link the allocated blocks to the price of coal set by CIL. Dr. Singh said it is true that the private parties that were allocated captive coal blocks could not achieve their production targets. This could be partly due to cumbersome processes involved in getting statutory clearances, an issue which the government is addressing separately, Dr. Singh said. Dr. Singh said that the government has initiated action to cancel the allocations of allottees who did not take adequate follow-up action to commence production. Moreover, CBI is separately investigating the allegations of malpractices, on the basis of which due action will be taken against wrongdoers, if any, Dr. Singh said. Trade Minister Anand Sharma on 23 August 2012 said that a deadlock in parliament over allegations of irregularities over the allocation of coal blocks is delaying the government's move to push ahead with reforms to stimulate economic growth. The government has very limited time to take economic reform measures given that assembly elections in Gujarat and Himachal Pradesh (HP) are scheduled in December this year. It will difficult for the government to enact controversial measures close to the assembly polls. After elections in Gujarat and HP, assembly elections are planned in a total of 10 states during the period from March 2013 to January 2014. The next general election is due in May 2014. The Union Cabinet last week deferred a decision on changes proposed in a draft land acquisition law that is aimed at streamlining the land acquisition process for projects. Union Finance Minister Mr. P. Chidambaram last week said that the goods and services tax (GST) is a more effective and efficient substitute for a plethora of indirect taxes. The Finance Minister said that he is hopeful that the GST Bill would be passed before the end of the current financial year. The Finance Minister further said that though there are still some issues relating to GST and its Network (GSTN) to be resolved, yet they are not insurmountable. The Central Statistics Office will unveil Q1 June 2012 GDP data on Friday, 31 August 2012. India's GDP growth slowed to a nine-year low of 5.3% in Q4 March 2012 due to high interest rates, sluggish global demand and the government's failure to carry out economic reforms. Markit Economics will unveil HSBC India Manufacturing Managers' Index (PMI) for August 2012 on 3 September 2012. On 5 September 2012, Markit Economics will unveil HSBC India Services PMI for August 2012. Foreign direct investment (FDI) in India slumped 78% to $1.24 billion in June 2012 from $5.65 billion in June 2011, government data showed on Friday 24 August 2012. For the April-June period--the first quarter of the fiscal year--FDI fell 67% to $4.42 billion. The Indian government last week eased rules governing overseas borrowing, hoping to ease borrowing by local companies and spur capital inflows. In one of the most significant elements of the change, the government raised by 50% the limit on rupee loans that infrastructure and manufacturing companies are allowed to refinance through overseas borrowings. Such companies will be able to refinance these loans by up to 75% of their average foreign-exchange earnings over the past three years, up from the previous limit of 50%, the finance ministry said. Union Minister of Commerce, Industry & Textiles Mr. Anand Sharma said 16 August 2012 that the government will come out with announcements pertaining to industrial environment that will address the subdued sentiment in the industry. Speaking after the fourth meeting of the Government-Industry Task Force Mr. Sharma said that there is a shared concern over the declining industrial production, particularly the manufacturing sector. Prime Minister Dr. Manmohan Singh said in his Independence Day speech on 15 August 2012 that at a time when the global economy is passing through a difficult phase, India must make every effort to resolve the problems inside the country so that the nation's economic growth and the creation of employment opportunities in the country are again speeded up. If we do not increase the pace of the country's economic growth, take steps to encourage new investment in the economy, improve the management of government finances and work for the livelihood security of the common man and energy security of the country, then it most certainly affects our national security, Dr. Singh said. The prime minister said the government has recently taken new measures to accelerate infrastructure development. Ambitious targets have been fixed in roads, airports, railways, electricity generation and coal production. The government will take steps to increase investment for infrastructure development with the help of the private sector, Dr. Singh said. "To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India", Dr. Singh said. Union Finance Minister P. Chidambaram said early this month that a path of financial consolidation will be unveiled shortly. Government finances are under pressure as expenses exceed revenue, mainly because of subsidies doled out for cheaper supplies of food, fuel and fertilizer. Mr. Chidambaram said that the fiscal-deficit target for the current financial year will be reassessed after a mid-year review later this financial year depending on the pace of expenditure and the resource position of the government. The government is aiming to restrict spending on subsidies, the finance minister said. The government has already taken some steps to reduce expenditure. In late May, the finance ministry asked government departments to reduce their non-plan spending -- expenditure that won't create long-term assets -- by 10% this fiscal year as part of its efforts to keep the fiscal deficit under check. The government intends to fine tune policies and procedures that will facilitate capital flows into India, Mr. Chidambaram said early this month. Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors, Mr. Chidambaram said. The government has appointed two committees -- one to examine anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) legal provisions and guidelines and the other to review taxation of the IT sector and Development Centres. Mr. Chidambaram said he has also directed a review of tax provisions that have a retrospective effect in order to find fair and reasonable solutions to pending as well as likely disputes between the Tax Departments and the Assessees concerned. The implementation of GAAR proposal introduced in the Union Budget 2012-13 in March 2012 by then-finance minister Pranab Mukherjee has been deferred to 1 April 2013. This came after heavy criticism from foreign investors who fear that GAAR would give the authorities arbitrary powers to examine any deal that they feel is designed to avoid tax. Prime Minister Dr. Manmohan Singh last month constituted an expert committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR) to undertake stakeholder consultations and finalise the guidelines for GAAR by 30 September 2012. Dr. Singh last month also decided to refer the issue of implications on FIIs and portfolio investors of the amendment made to the Income Tax Act relating to the taxation of non-resident transfer of assets where the underlying asset is in India to the Expert Committee on anti-avoidance tax proposal viz. the General Anti-Avoidance Rules (GAAR). Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the Prime Minister's Office (PMO) said in a statement issued on 30 July 2012. Asian stocks fell on Thursday, as reports on Japanese retail sales and South Korean business confidence add to signs of an economic slowdown and investors doubt the Federal Reserve will announce further stimulus. Key benchmark indices in Indonesia, Hong Kong, Singapore, Japan, South Korea and Taiwan fell by between 0.05% to 1.28%. China's Shanghai Composite rose 0.28%. Japan's overall retail sales turned negative in July with a 0.8% drop from a year earlier, the first such fall since November. Sales for the large retailers plunged 4.4%, accelerating a recent downward trend. The Bank of Japan next meets on Sept. 18 and 19 to review monetary policy. The Philippine economy grew more than estimated last quarter as manufacturing, services and construction helped spur the strongest performance since the 2010 bounce-back from the global credit crunch. Gross domestic product increased 5.9% in the three months through June from a year earlier compared with a revised 6.3% gain in the previous quarter, the National Statistical Coordination Board said in Manila today. US stocks closed with mild gains Wednesday after the Federal Reserve's Beige Book reported gradual U.S. economic expansion. US, the world's biggest economy continued to expand “gradually” in July and early August as improving housing and retail sales helped outweigh a weakness in manufacturing, the Fed said yesterday in its Beige Book business survey based on reports from its 12 districts. The report reflects information collected on or before Aug. 20 and summarized by the Boston Fed. At the same time, the U.S. Commerce Department said the nation's gross domestic product rose at a 1.7% annual rate in April-June, an upward revision of its prior estimate of 1.5% Federal Reserve Chairman Ben Bernanke's speech is due Friday. Investors are looking for guidance as to the timing of possible easing measures in a speech by Bernanke on Friday, 31 August 2012. The Federal Open Market Committee (FOMC) holds a two-day meeting on US interest rates on September 12-13. Data on personal income and spending data for July is due on Thursday, 30 August 2012, and the Chicago PMI is due for release on Friday 31 August 2012. US market remains closed on Monday, 3 September 2012, for Labor Day holiday. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. The results of a detailed audit on the capitalisation needs of Spain's banks are expected in mid-September 2012. ECB holds its monthly policy meeting on euro area interest rates on 6 September 2012. The ECB slashed its interest rates to an all-time low in July. The ECB is expected to continue its easing cycle, probably as soon as in September, to help the economic recovery of recession- and crisis-ridden members of the euro zone. UK's central bank -- the Bank of England -- holds its monthly meeting on interest rates on 6 September 2012. Germany's constitutional court will decide on 12 September 2012 whether the European Stability Mechanism (ESM) -- the proposed permanent successor to the euro-zone's current emergency lender viz. the European Financial Stability Mechanism -- violates German law and the Maastricht Treaty's 'no bailout' clause.