Market may open slightly higher

The market may open slightly higher tracking mostly firm Asian stocks. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a gain of 7 points at the opening bell. Asia shares meandered mostly higher in relatively quiet Tuesday trading, with investors looking ahead to major events later in the week. Power Grid Corporation of India said after market hours on Monday that the board of directors of the company at its meeting held on August 31, 2012, have approved the investment approval for ‘System Strengthening - XIX in Southern Regional Grid' at an estimated cost of Rs 1935.35 crore with commissioning schedule of 27 months from the date of investment approval. Car market leader Maruti Suzuki India has unveiled a refreshed avatar of Ritz Diesel. Priced attractively at Rs. 5.31 lakh onwards, the new Ritz Diesel is sure to entice new age buyers who are looking for contemporary design, unmatched performance and superb fuel efficiency, company said in a statement. On the introduction of the new Ritz Diesel, Manohar Bhat, Vice President (Marketing) Maruti Suzuki India said, “It is heartening to see a fairly young brand crossing 200,000 sales mark in just 37 months. This reflects the huge customer acceptability of the Ritz. Numerous changes being introduced now will make the Ritz brand more vibrant. Most important, the new Ritz is more fuel-efficient with enhanced driving comfort. This makes it even more attractive for the customer and also gives us confidence to generate additional sales.” Punjab National Bank said that it has reduced interest rates on housing loans by 25 basis points. Home loans of up to Rs 75 lakh would now attract an interest rate of 10.50% or the base rate. Earlier, the interest rate was base rate plus 0.25% amounting to 10.75%, PNB said in a statement. Similarly, rate has been reduced for home loans above Rs 75 lakh to 10.75% from 11% earlier. The rate of interest on car loans with tenure below 3 years has also been reduced by 50 basis points. With regard to car loans, three-year loans would now be available at 11.50% against 12%, down by 0.5%. Car loans above 3 years would also attract 0.5% lower rate at 12% compared to 12.50% earlier, it said. The changes are effective from 3 September 2012. Key benchmark indices declined to lowest closing levels in a month on Monday, 3 September 2012 as investors were concerned by the latest data showing growth in manufacturing sector easing to a nine-month low in August 2012. The BSE Sensex fell 45.16 points or 0.26% to 17,384.40 on that day, its lowest closing level since 3 August 2012. Foreign institutional investors (FIIs) sold shares worth net Rs 54.79 crore on Monday, 3 September 2012, as per the provisional data from the stock exchanges. FIIs inflow into the secondary equity market totaled Rs 10803.90 crore in August 2012, as per data from Securities & Exchange Board of India (Sebi). FIIs had bought shares worth net Rs 9691 crore from the secondary equity markets in July 2012. Meanwhile, a panel appointed by the government recommended that the implementation of a much-debated rule introduced to fight tax evasion be deferred by three years, a statement by the country's finance ministry said Saturday. "It needs to be realized that GAAR (General Anti Avoidance Rules) is an extremely advanced instrument of tax administration—one of deterrence, rather than for revenue generation—for which intensive training of tax officers, who would specialize in the finer aspects of international taxation, is needed," the panel said while submitting a draft report on the rule. The committee headed by Parthasarathi Shome, the chief of a government body on international economic relations, said that the government should announce the implementation date immediately to remove uncertainty from the minds of stakeholders. This would help taxpayers plan for a change in the "anti-avoidance regime," it added. The panel has sought comments from various sections of the government and the general public by Sept. 15, before it submits its final recommendations by Sept. 30. The so-called GAAR provisions and a retrospective tax amendment were proposed by the government in March and since then have hurt investor sentiment and been met by strong criticism in India and overseas. "GAAR has been received poorly in India due to the somewhat more stringent versions put out by government," as well as the perceived lack of adequate consultation with stakeholders, the panel said in its report. The sharp criticism had forced the government to defer implementation of GAAR by a year to April 1, 2013. The expert panel suggested GAAR be implemented from 2016-2017. Growth in India's manufacturing sector eased to a nine-month low in August as export orders fell for a second month, underscoring the risks to the wider economy from Europe's debt crisis, a business survey showed on Monday. The HSBC manufacturing Purchasing Managers' Index (PMI) eased for the second month to 52.8 in August, its lowest level since November, from 52.9 in July. However, it has kept above the 50 mark that divides growth and contraction for more than three years. India's annual exports fell 14.8% to $22.4 billion in July, while imports fell 7.6% to $37.9 billion, leaving a trade deficit of $15.5 billion, the trade ministry said in a statement on Monday. India's gross domestic product (GDP) rose 5.5% in Q1 June 2012, data released by the government Friday, 31 August 2012, showed. The services sector grew 6.9%, industry grew 3.6% and agriculture sector grew 2.9%. Manufacturing output rose 0.2% while mining sector grew 0.1% in Q1 June 2012. The economic activities which registered significant growth in Q1 June 2012 are construction at 10.9%, 'financing, insurance, real estate and business services' at 10.8% and 'community, social and personal services' at 7.9%. The key indicators of construction sector viz. production of cement increased by 11% and consumption of finished steel registered growth rate of 8.8% in Q1 June 2012, Ministry of Statistics & Programme Implementation said in a statement Friday, 31 August 2012. India's economy has slowed sharply over the past year due to weak industrial activity as high interest rates crimped demand and made it hard for corporates to finance expansion plans. Reacting to the first quarter GDP growth data, Finance Minister P. Chidambaram said that after the continuous reduction in the growth rate in successive quarters beginning in the fourth quarter of 2010-11, this is the first time when quarterly growth rate has exceeded the growth rate in the previous quarter. The decline in the growth of fixed investment (0.7% in Q1 of 2012-13 as against 14.7% in Q1 of 2011-12) is a source of concern to government, Mr. Chidambaram said. It emphasizes once again the need to take quick decisions to accelerate investments, especially removing all bottlenecks to investments in the manufacturing sector, the Finance Minister said. At the same time, there are also encouraging signs such as the growth of the construction sector at 10.9 per cent (Q1 of 2012-13) as against 3.5% in Q1 of 2011-12, Mr. Chidambaram said. Prime Minister Dr. Manmohan Singh early last 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 recently deferred a decision on changes proposed in a draft land acquisition law that is aimed at streamlining the land acquisition process for projects. Reserve Bank of India (RBI) governor D Subbarao early last week 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 in August 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 picked up in August 2012 following revival of monsoon rains. According to data released by the Ministry of Agriculture, rice was sown in a total area of 347.10 lakh hectare (lh) till 31 August 2012, compared with 329.19 lh as on 24 August 2012. Rice sowing has exceeded the normal area of 331.85 lh for the summer sown crop by this time of the year. Cumulative sowing of oilseeds totaled 167.15 lh till 31 August 2012, compared with 164.29 lh as on 24 August 2012. Sowing of oilseeds remains lower than the normal area of 168.36 lh by this time of the year. Sowing of cotton totaled 112.83 lh till 31 August 2012, compared with 111.53 until 24 August 2012. The normal cotton sowing area of 106.91 lh for the cotton crop by this time of the year has already been surpassed. Cumulative sowing of coarse cereals totaled 167.87 lh till 31 August 2012, compared with 165.34 lh until 24 August 2012. Sowing of coarse cereals remains lower than 196.77 lh of normal area for the crop this time of the year. Sowing of pulses totaled 97.70 lh till 31 August 2012, compared with 88.30 lh until 24 August 2012. Sowing of pulses remains lower than 101.31 lh of normal area for this time of the year. Sowing of jute and mesta totaled 8.78 lh until 31 August 2012. Sowing of jute and mesta remains lower than 9 lh of normal area for this time of the year. Rainfall up to 29 August 2012 was 12% 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 early last week 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. 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. Mr. Chidambaram had recently 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. On 5 September 2012, Markit Economics will unveil HSBC India Services PMI for August 2012. 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. Asian shares steadied on Tuesday as investors saw weak regional and global economic data as raising the prospect for further stimulus from central banks to underpin growth, while Europe kept hopes for some progress in tackling its debt crisis. Key benchmark indices in Indonesia, Singapore, South Korea and Taiwan rose by between 0.05% to 0.23%.. Key benchmark indices in China, Hong Kong and Japan shed by between 0.01% to 0.1%. Japan's central bank, Bank of Japan, next meets on Sept. 18 and 19 to review monetary policy. Australia's seasonally adjusted current-account deficit narrowed to 11.8 billion Australian dollars ($12.1 billion) in the second quarter of 2012, from A$13 billion in the previous period, the Australian Bureau of Statistics reported Tuesday. Exports increased 4% to A$3.1 billion, while imports increased 3% to A$2.4 billion, the statistics body said. U.S. stock markets remained closed yesterday for a holiday. The U.S. will report its Institute for Supply Management manufacturing data on Tuesday, a key report helping to gauge the probability of an easing by the Federal Reserve at its September 12-13 policy meeting. The Federal Open Market Committee (FOMC) holds a two-day meeting on US interest rates on September 12-13. Election for a new president in the United States, the world's biggest economy, is scheduled on 6 November 2012. Moody's Investors Service has changed its outlook on the Aaa rating of the European Union to negative, warning it might downgrade the bloc if it decides to cut the ratings on the European Union's four biggest budget backers: Germany, France, UK and Netherlands. European Central Bank (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. The results of a detailed audit on the capitalisation needs of Spain's banks are expected in mid-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. Business surveys from the euro zone to China on Monday underscored a spreading contraction in manufacturing business around the world in August, as the damage on the global economy from the euro zone's troubles deepened.