Market may open slightly lower

The market may open slightly lower on mostly lower Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 4.50 points at the opening bell. Asian stocks fell on Wednesday as China's manufacturing expanded at the slowest pace in eight months and South Korea's exports fell. The government on Tuesday, 31 July 2012, announced a key cabinet reshuffle with Home Minister P. Chidambaram named as the new Finance Minister. Power minister Sushilkumar Shinde was named as the new Home Minister. The post of the Finance Minister was left empty after Pranab Mukherjee resigned from the post ahead of the Presidential election. This is the third time that Chidambaram is holding the Finance Ministry portfolio. Minister of Corporate Affairs M. Veerappa Moily has been assigned the additional charge of the Ministry of Power. The manufacturing Managers' Index (PMI) for July 2012 will be out today, 1 August 2012. The HSBC manufacturing Purchasing Managers' Index (PMI) rose to 55 in June, a four-month high, from 54.8 in May. It has kept above the 50 mark that divides growth and contraction for more than three years. Among corporate news, IDBI Bank said after market hours on Tuesday that net profit rose 27.52% to Rs 427.34 crore on 11.99% rise in total income to Rs 6786.81 crore in Q1 June 2012 over Q1 June 2011. Jaiprakash Associates said after market hours on Tuesday that net profit fell 24.56% to Rs 138.84 crore on 3.3% rise in total income to Rs 3036.67 crore in Q1 June 2012 over Q1 June 2011. ACC turns ex-dividend today, 1 August 2012, for interim dividend of Rs 11 per share for the year ending 31 December 2012. Nestle India turns ex-dividend today, 1 August 2012, for interim dividend of Rs 18 per share for the year ending 31 December 2012. Cipla turns ex-dividend today, 1 August 2012, for dividend of Rs 2 per share for the year ending 31 March 2012. Cipla said after market hours on Tuesday that profit after tax rose 58.2% to Rs 400.76 crore on 23.6% rise in income from operations to Rs 2012.44 crore in Q1 June 2012 over Q1 June 2011. Income from operations crossed Rs. 2000 crore for the quarter and posted a growth of about 24%. Domestic sales grew by more than 30% and export sales grew by about 18%. Operating margins and profits after tax have increased by more than 47% and 58% respectively. Material cost has decreased by 5% mainly on account of changes in product mix viz. lower proportion of anti-retrovirals and higher contribution of anti-depressant segment (Escitalopram) coupled with increased realizations. As a result, operating margins have also increased by about 5%. The increase in staff cost (Rs 42 crore) is due to annual increments and increase in manpower. Other expenditure has increased by Rs 91 crore for the quarter on account of increase in marketing expenses, professional fees, travel expenditure, etc. Tax for the current quarter has marginally increased due to higher profits. Automobile and cement stocks will be focus as companies from these two sector start unveil monthly sales volume data for July 2012 from today, 1 August 2012. Key benchmark indices edged higher for the third straight session on Tuesday, 31 July 2012 with the market sentiment boosted by data showing resumption of buying of Indian stocks by foreign funds. The BSE Sensex rose 92.50 points or 0.54% to 17,236.18 on that day, its highest closing level since 19 July 2012. Foreign institutional investors (FIIs) bought shares worth Rs 879.97 crore on Tuesday, 31 July 2012, as per the provisional data from the stock exchanges. FIIs had bought shares worth a net Rs 1615 crore from the secondary equity markets on 27 July to 28 July 2012, according to data released by Securities & Exchange Board of India (Sebi). FIIs have made substantial purchases of Indian stocks this month The All India Consumer Price Index Number for Industrial Workers (CPI-IW) for the month of June 2012 increased by 2 points and stood at 208. The point to point rate of inflation based on CPI-IW (General) declined to 10.05% in June 2012 from 10.16% in May, 2012. Inflation based on Food Index declined to 10.45% in June 2012 from 10.61% in May 2012, the Ministry of Labour & Employment said in a statement on Tuesday, 31 July 2012. The Reserve Bank of India (RBI) on Monday, 31 July 2012, kept its key policy rate viz. the repo rate unchanged at 8% after first quarter review of Monetary Policy 2012-13 in an effort to keep a lid on inflation and inflation expectations. The central bank cut the statutory liquidity ratio (SLR) of scheduled commercial banks to 23% their net demand and time liabilities (NDTL) from current 24%, with effect from the fortnight beginning 11 August 2012, to ensure that liquidity pressures do not constrain the flow of credit to productive sectors of the economy. The cash reserve ratio (CRR) of scheduled banks has been retained at 4.75% of their net demand and time liabilities. RBI said the current economic slowdown has to be seen in reference to the trend rate of growth in order to assess its inflationary implications. In this context, investment activity has remained subdued over the last two years, RBI said. External demand has also remained weak due to the slowdown in global growth. Consequently, the post crisis trend rate of growth, which was earlier estimated at 8% has dropped to 7.5%. While the current rate of growth is clearly lower than trend, the output gap will remain relatively small. Under these conditions, demand pressures on inflation can re-emerge quite quickly, exacerbating the existing supply pressures, RBI said. RBI said the conduct of monetary policy will continue to condition and contain perception of inflation in the range of 4% to 4.5%. This is in line with the medium-term objective of 3% inflation consistent with India's broader integration into the global economy, RBI said. Minister of State for Agriculture Harish Rawat on Monday, 30 July 2012, said rainfall in August, a critical month for summer crops, is likely to be 84%-85% of the long-term average, below the previous forecast of 96%. Commodities such as sugar and pulses have already started becoming costlier in anticipation of a fall in output and could complicate efforts by the authorities who have been struggling for more than two years to control inflation. Rainfall in the next five days will be critical for the crops and there's still a chance that the crop situation will improve if rains pick up, Mr. Rawat said. The monsoon has been slow and erratic so far this season. The monsoon rainfall was 21% below the long-term average as of Sunday, 29 July 2012. The rain has been deficient in northern and western parts of the country, threatening the output of summer crops such rice, pulses and sugar. A ministerial panel may soon review the drought-like situation in the country, Farm Minister Sharad Pawar said on Thursday, 26 July 2012, after a meeting with the country's food minister. 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. Rainfall has intensified in Madhya Pradesh, the country's largest oilseed-growing region, improving prospects for the soybean crop. Sowing of summer crops has picked up pace during the past few days. According to data released by the Ministry of Agriculture, rice was sown in 191.06 lakh hectares (lh) till Friday, 27 July 2012, sharply higher than 144.59 lh a week back. It, however, remains lower than 199.77 lh of normal area for this time of the year. Cumulative sowing of coarse cereals totaled 117.48 lh as on 27 July 2012, compared with 95.43 lh a week back. It, however, remains much lower than 160.86 lh of normal area for this time of the year. Sowing of pulses totaled 62.99 lh as on 27 July 2012, sharply higher than 40.19 lh a week back. It, however, remains lower than 79.82 lh of normal area for this time of the year. Sowing of oilseeds totaled 138.33 lh as on 27 July 2012, compared with 108.84 lh a week back. The normal oilseeds sowing area of 134.45 lh by this time of the year has already been surpassed. Sowing of cotton totaled 97.24 lh as on 27 July 2012, compared with 83.74 lh as on 20 July 2012. The normal cotton sowing area of 94.02 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.29 lh as on 27 July 2012, exceeding the normal area of 8.22 lk for the crop by this time of the year. The central government has prepared extensive plans to deal with the deficiency in the monsoon/rainfall in some parts of the country, the Prime Minister's Office (PMO) said last week. A proposal for increase in subsidy for supply of pulses through Public Distribution System to BPL families is being brought before Cabinet Committee on Economic Affairs by the Ministry of Consumer Affairs, Food and Public Distribution, it said. The government will increase the availability of electricity and diesel to the grain-bowl northern region to help farmers draw ground water so that the yield of rice isn't affected, it added. It also said there is a proposal to increase the subsidy for the supply of pulses through the government's welfare program to poor families. The IMD last month predicted that rainfall this monsoon would likely be 96% of the 50-year average, with an error margin of 4%. The Prime Minister's Office said actual rainfall could be at the lower end of that range, which means around 92% of the 50-year average. Principal adviser to the Planning Commission Pronab Sen last week said slowing investment due to weak confidence in the economy is hurting growth. Mr. Sen said Indian companies aren't facing any shortage of funds. Many of them are sitting on piles of cash and aren't even repatriating overseas borrowings, he added. The government should take steps to meet the fiscal deficit target set out in the budget and that would improve sentiment and revive investments, Mr. Sen said. He said the government should scale back its spending and slash subsidies on fuels, food and fertilizers to help check its budget deficit. Slowing growth in investment remains a cause for concern for India. Investment makes up 35% of India's economic activity. The services purchasing managers' index for July 2012 is expected to be released on Friday, 3 August 2012. HSBC's services purchasing managers' index, which gauges the activity of around 400 firms in India, dropped to 54.3 in June from 54.7 in May. However, it has kept above the 50 mark that signifies growth since November. Prime Minister Dr. Manmohan Singh has 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). "It is necessary to have clarity on the tax liability of portfolio investors and foreign institutional investors as a result of this amendment particularly when the investment is made through a registered stock exchange in accordance with SEBI guidelines and purely in the form of portfolio investment", the Prime Minister's Office (PMO) said in a statement issued Monday, 30 July 2012. Any clarification needs to be harmonised with the GAAR guidelines and will have to address any residual concerns outside of GAAR, the PMO said. Dr. Singh early this 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. An India-Mauritius joint panel will discuss a series of proposals to review the double taxation avoidance treaty between the two nations on 22-24 August in Mauritius. India has been looking to negotiate the double taxation avoidance agreement with Mauritius for the past few years to check so-called round tripping and other potential abuses. Round tripping entails moving money out of one country to another, and getting it back under the garb of foreign capital. Capital gains tax is close to zero in Mauritius and almost 40% of investments into India come through the island nation. Under the bilateral agreement, capital gains from sale of securities can be taxed only in Mauritius. The India-Mauritius joint working group will also discuss the inclusion of a so-called limitation of benefit clause, similar to the Singapore tax treaty with India, to ensure only genuine Mauritius-based companies are benefited. India's tax agreement with Singapore says that only those companies that spend a minimum of $200,000 (about Rs 1 crore) in Singapore can avail the benefits of the treaty. Sanctity of tax residency certificates issued by a country to companies operating in its jurisdiction to enable the firms to claim tax benefits under various treaties is another issue between India and Mauritius. While India in this year's national budget said the certificates are a necessary but not sufficient condition, Mauritius wants those issued by it honoured. Draft guidelines issued by Indian government for implementing the controversial anti-avoidance tax proposal viz. the GAAR state that GAAR provisions should be invoked on a foreign institutional investor (FII), if it chooses to take a treaty benefit, but would not in any case be invoked in the case of the non-resident investors of the FII. The draft guidelines suggested that the onus of proving wrongdoing should be on the authorities. Voting for the country's new vice president takes places on 7 August 2012 -- a day before the monsoon session of parliament kicks off. Prime Minister Dr. Manmohan Singh said in a newspaper interview this month that he has identified controlling the fiscal deficit, achieving clarity on tax matters, reviving the mutual funds and insurance industries, clearing a backlog of foreign investment proposals and boosting infrastructure as his focus areas in the short term. Singh said there will be no arbitrariness in tax matters. The statement assumes significance in the context of a raging controversy over the Income Tax amendment to re-open tax demands with retrospective effect from companies like Vodafone over acquisition of companies having operations in India but registered abroad to avoid taxes. Singh last month said he is chalking out plan for the country's economic revival. Singh last month took additional charge at the finance ministry after Pranab Mukherjee resigned as finance minister on 26 June 2012 to contest the presidential polls. The monsoon session of the parliament will begin on 8 August 2012 and the session will conclude on 7 September 2012, Parliamentary Affairs Minister Pawan Kumar Bansal said on Wednesday, 18 July 2012. The government hasn't yet finalized the agenda for the session, but the expectation is that Prime Minister Dr. Manmohan Singh -- who took charge of the finance ministry after Mr. Pranab Mukherjee resigned to contest the presidential elections -- will try and push through long-pending legislations. These could include the Direct Tax Code and the insurance, pension and banking bills. The government would also place before lawmakers the first demand for additional spending for this fiscal year which began April 1. Corporate affairs minister Veerappa Moily said in a newspaper interview published on 11 July 2012 that the government is hopeful of the passage of the pension bill in the monsoon session of parliament. Investors' focus is currently on Q1 June 2012 earnings. DLF and Steel Authority of India unveil Q1 results on 6 August 2012. Mahindra & Mahindra and Bharti Airtel unveil Q1 results on 8 August 2012. Tata Motors and Ranbaxy Laboratories unveil quarterly results on 9 August 2012. Sun Pharmaceuticals Industries, Siemens and BPCL announce quarterly results on 10 August 2012. ONGC announces Q1 results on 11 August 2012. Coal India announces Q1 results on 13 August 2012. Hindalco Industries and IDFC will unveil Q1 results on 14 August 2012. Asian stock markets moved mostly lower Wednesday, the first day of the new month, with investors reacting to Japanese earnings and Chinese economic data amid broader nervousness ahead of central-bank meetings in the U.S. and Europe. Key benchmark indices in Indonesia, South Korea, Japan and Taiwan fell by between 0.29% to 1.07%. Key benchmark indices in China, Hong Kong and Singapore rose by between 0.01% to 1.06%. China's official manufacturing Purchasing Managers' Index (PMI) released Wednesday morning registered a small drop to 50.1 in July, from 50.2 in June, below a Dow Jones Newswires forecast for a 50.4 reading. The Governing Council of the European Central Bank (ECB) holds a monthly monetary policy review on interest rates for the euro area on Thursday, 2 August 2012. Comments from ECB President Mario Draghi last week have fueled expectations that the institution will take bold action to bring down borrowing costs for Spain, which had moved well into crisis territory last week, and Italy, which faces uncomfortably high bond yields. ECB is widely expected to leave interest rates unchanged after it cut the benchmark one-week lending rate to a fresh record low earlier this month. The Monetary Policy Committee of Bank of England holds a monthly policy meeting on interest rates in the United Kingdom (UK) on the same day. Germany's Federal Constitutional Court will announce a decision on lawsuits challenging the country's participation in the permanent euro-zone rescue fund, the European Stability Mechanism, and the fiscal pact on 12 September 2012. The court held a public hearing earlier this month to examine complaints that participation in the fund and the fiscal pact violated German law by taking some authority over the national budget away from parliament. U.S. shares ended with mild losses Tuesday, as investors fretted that central bankers wouldn't introduce major stimulus measures when the U.S. Federal Reserve wraps up its two-day meeting later in the global trading day and the European Central Bank and the Bank of England meet Thursday. The Federal Open Market Committee's (FOMC) two-day policy meeting on US interest rates ends today, 1 August 2012. It remains to be seen if the FOMC announces or at least gives indication of another round of asset purchases, known as quantitative easing, to give the US stalling economy a jolt. US gross domestic product which is the value of all goods and services produced in the country, rose at a sluggish 1.5% clip in Q2 June 2012 as consumers pared spending and businesses invested at a slower pace, the Commerce Department reported on 27 July 2012. A report from Automatic Data Processing, Inc. (ADP) on private-sector employment in the United States in July 2012 is due on Wednesday, 1 August 2012. On the same day, a manufacturing survey for July 2012 from the Institute for Supply Management is also due for release. Data on weekly jobless claims in the US and data on factory orders are due for release on Thursday, 2 August 2012. On the same day, US retailers will unveil monthly same-store sales data. The influential US government data on non-farm payroll for July 2012 is due on Friday, 3 August 2012. In June, the United States created 80,000 jobs, the third straight month of job growth of under 100,000.