Market may surge on firm Asian stocks

The market may surge in early trade on strong Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 44 points at the opening bell. Asian stocks rose for the first time in four days on Monday after creditors said Greece is making progress on meeting bailout terms and U.S. payrolls climbed more than forecast. Among corporate news, DLF and Steel Authority of India unveil Q1 results today, 6 August 2012. Metal stocks will be in focus as LMEX, a gauge of six metals traded on the London Metal Exchange gained 1.64% on Friday, 3 August 2012. PSU OMCs, oil exploration firms and airline stocks will be in focus as US crude-oil futures for September delivery vaulted almost 5% to close above $91 a barrel on Friday after better-than-expected U.S. data fueled hopes that economic strengthening would lead to increased oil demand. Higher crude oil prices could increase under-recoveries of state-run oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. Higher crude oil prices will result in higher realizations from crude sales for oil exploration firms. . Aviation turbine fuel, or jet fuel constitutes more than 50% of operating cost for airliners. Prices of jet fuel are directly linked to crude oil prices. State-run oil marketing companies--Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation revise jet fuel prices on the 1st and 16th of every month based on the average international crude price in the preceding fortnight. Telecom stocks will also be on investors' radar as the government on Friday reduced by almost a quarter the minimum bid price in an auction for mobile airwaves, failing to appease carriers hoping for a deeper cut. The country is selling 2G airwaves through open auction for the first time after the Supreme Court said a 2008 government grant process was flawed and ordered all 122 zonal permits to be revoked. The auction base price was set at Rs 14000 crore, or at about 7.4 times the 2008 price, for 5 mega hertz of second-generation airwaves in the 1800 MHz band, in which GSM-based mobile carriers operate, for all of India's 22 telecoms zones. The base price is a 23% cut from the telecoms sector regulator's proposed price of Rs 18110 crore. Carriers campaigned for an 80% cut. Divis Laboratories said that net profit rose 63.15% to Rs 167.38 crore on 36.12% rise in total income to Rs 510.17 crore in Q1 June 2012 over Q1 June 2011. Key benchmark indices fell for the second straight day on Friday, 3 August 2012 as a downward revision in 2012 monsoon forecast from the state-run India Meteorological Department (IMD) on Thursday, 2 August 2012, hurt investor sentiment adversely. The BSE Sensex lost 26.43 points or 0.15% to settle at 17,197.93 on that day, its lowest closing level since 30 July 2012. Foreign institutional investors (FIIs) bought shares worth Rs 208.69 crore on Friday, 3 August 2012, as per provisional figures on the stock exchanges. FIIs made substantial purchases of Indian stocks last month. FIIs bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. India's services output growth held steady in July, helped by resilient demand, although a weak global economy and moderate growth in local industry could constrain expansion in the coming months, a survey showed on Friday, 3 August 2012. The seasonally adjusted HSBC Service Sector Business Activity Index, released by Markit, was 54.2 in July, little changed from June's 54.3. A figure below 50 indicates contraction. New orders at private sector companies rose steeply in July with services firms signaling a faster increase than those engaged in manufacturing. The HSBC India Composite Output Index fell to 54.4 in July from 55.7 in June. July's expansion is the slowest in three months, HSBC said. The India Meteorological Department (IMD) on Thursday, 2 August 2012, said the El Nino weather pattern is likely to reduce rains again in the second half of the June to September monsoon season. The IMD said rains over the entire June to September season are now expected to be less than 90% of long-term average. This is lower than IMD's previous forecast of 96%. Monsoon rains are considered deficient -- a drought in layman's terms -- if they fall below 90% of a 50-year average. Between June 1 and August 1, rainfall was about 19% below normal. The IMD expects normal rains in August -- a critical month for summer crops. It expects rainfall to be 5-6% below average in September due to the possibility of El Nino. The weather office said rainfall during August-September is expected to be 91% of the long-term average. The rainfall distribution has been erratic this year as major crop- growing regions such as Maharashtra, Karnataka, Gujarat, Punjab and Haryana have received scanty showers threatening the prospects of summer crops. With the monsoon season halfway through, India is staring at the possibility of a full-blown drought in some regions. A panel of Indian ministers early last week approved steps to contain the impact of a near-drought situation. The steps include providing a diesel-price subsidy to farmers, increasing the subsidy on seed supplies and removal of the import tax on oilmeals. Insufficient rainfall could lead to higher food inflation. There will be an impact on foodgrain output, but it is too early to give any estimate, Farm Minister Sharad Pawar said early last week. Mr. Pawar said the government will raise subsidies for the supply of various seeds for alternate crops in affected areas. Rice sowing has picked up according to the latest data released by the Ministry of Agriculture. Rice was sown in 233.68 lakh hectares (lh) till Friday, 3 August 2012, compared with 191.06 lh a week back. Rice sowing so far has been below the normal area of 240.89 lh for the summer sown crop by this time of the year. Cumulative sowing of coarse cereals totaled 135.75 lh till 3 August 2012, compared with 117.48 lh a week back. It, however, remains much lower than 169.30 lh of normal area for the crop this time of the year. Sowing of pulses totaled 72.79 lh till 3 August 2012, compared with 62.99 lh a week back. It, however, remains lower than 84.15 lh of normal area for this time of the year. Sowing of oilseeds totaled 145.17 lh till 3 August 2012, compared with 138.33 lh a week back. It is almost equal to the normal area of 145.49 lh for oilseeds by this time of the year. Sowing of cotton totaled 100.14 lh till 3 August 2012, compared with 97.24 lh as on 27 July 2012. The normal cotton sowing area of 99.89 lh by this time of the year has already been surpassed. Sowing of jute and mesta totaled 8.40 lh as on 3 August 2012, exceeding the normal area of 8.22 lk for the crop by this time of the year. 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. A bad monsoon will have a larger impact on inflation than on growth as agriculture output constitutes a relatively small portion of India's economy, Indian central bank officials said on Wednesday, 1 August 2012, in a conference call following the release of its monetary policy review on Tuesday, 31 July 2012. The Reserve Bank of India (RBI) on Tuesday, 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 RBI, however, lowered banks' statutory liquidity ratio, or the part of deposits that must be invested mainly in government bonds, by a percentage point to 23% to ensure that liquidity pressures do not constrain the flow of credit to productive sectors of the economy. Principal adviser to the Planning Commission Pronab Sen recently 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. 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 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. 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. 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. Mahindra & Mahindra and Bharti Airtel unveil Q1 results on 8 August 2012. Tata Motors and Ranbaxy Laboratories unveil quarterly results on 9 August 2012. State Bank of India, Sun Pharmaceuticals Industries, Siemens and BPCL announce quarterly results on 10 August 2012. ONGC announces Q1 results on 11 August 2012. Tata Steel and Coal India unveil Q1 results on 13 August 2012. Hindalco Industries and IDFC will unveil Q1 results on 14 August 2012. Asian shares climbed Monday, joining in a global stock rally triggered by stronger U.S. economic data and optimism for progress in Europe. Key benchmark indices in China, Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.08% to 2.11%. Australian inflation reached 0.2% in July from the previous month, according to the TD Securities – Melbourne Institute monthly survey. In June, the survey showed a 0.2% monthly drop. On an annual basis, the gauge rose 1.5%, compared to a 1.6% increase in June. Greece and its creditors agreed on the need for more budget cuts to comply with bailout terms after more than a week of meetings in Athens. 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. US stocks surged Friday, with the Dow Jones Industrial Average jumping to a three-month high, after U.S. nonfarm payrolls rose more than expected in July. U.S. employers in July hired the most workers in five months, but an increase in the jobless rate to 8.3% kept prospects of further monetary stimulus from the Federal Reserve on the table. Nonfarm payrolls rose 163,000 last month, the Labor Department said on Friday, breaking three straight months of job gains below 100,000 and offering hope for the ailing economy. The unemployment rate rose from 8.2% in June, even as more people gave up the search for work and a survey of households showed a drop in employment. The Federal Reserve on Wednesday sent a stronger signal that a new round of major support could be on the way if the recovery did not pick up. Service-sector activity expanded at a slightly faster pace in July than a month earlier, according to the Institute for Supply Management, bucking economists' expectations for the group's nonmanufacturing index to show slowing expansion. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012.