Market seen opening higher; organised retailers in focus

Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could gain 11.50 points at the opening bell. Market sentiment will be boosted as FDI in multi-brand retail got the approval of the Lok Sabha on Wednesday as the Opposition motion seeking immediate withdrawal of the decision was rejected convincingly. Asian stocks traded mostly higher Thursday, ahead of the European Central Bank (ECB) policy meeting later in the session. Reliance Industries said before market hours today, 6 December 2012 the Board of Ex-Im Bank has voted to extend the single largest financing transaction of $2.1 billion to Reliance Industries. This includes a $1.06 billion JP Morgan Chase loan to the facility. “The loan will be primarily used to finance goods and services procured from exporters and suppliers in the United States as part of Reliance's expansion projects at Jamnagar, Gujarat,” a statement said. Shares of organised retailers Pantaloon Retail (India), Shopper's Stop and Trent will be in focus after the UPA II government won the Parliament vote in favour of FDI in multi-brand retail in Lok Sabha. FDI in multi-brand retail on Wednesday, 5 December 2012 got the approval of the Lok Sabha as the Opposition motion seeking immediate withdrawal of the decision was rejected convincingly as BSP and SP walked out. 218 voted in favour of the Opposition motion, while 253 voted against it in the House where 471 members participated in the voting. The total strength of the House is 545. The House also rejected the motion seeking amendment to the rules notified by the Reserve Bank under Foreign Exchange Management Act (FEMA) to enable FDI in multi-brand retail. While 254 voted in favour of the government, 224 were against. Meanwhile, the debate on FDI in multi-brand retail under rule 168 that entails voting will take place in the Rajya Sabha today, 6 December 2012 and tomorrow, 7 December 2012. The government was forced to relent after the Opposition stalled proceedings of both Lok Sabha and Rajya Sabha and demanded that the government face a trial of strength on its nod for 51% FDI in multi-brand retail. IndusInd Bank after trading on Wednesday, 5 December 2012, said that the finance committee of the board of directors of the bank has approved the allotment of 5.21 crore equity shares at a price of Rs 384 per share (including a premium of Rs 374 per share) aggregating to Rs. 2000.64 crore to qualified institutional buyers (QIBs). Shares of integrated jewellery firm Tara Jewels will list on the stock exchanges today, 6 December 2012. The company issued shares at the higher end of price band of Rs 225 to 230 per share. The issue was oversubscribed about 2 times. Key benchmark indices edged higher in volatile trade on Wednesday, 5 December 2012 as world stocks rose after comments from China's new leaders on Tuesday, 4 December 2012, that they would continue their supportive policy stance. China is the world's second biggest economy after the United States. The BSE Sensex advanced 43.74 points or 0.23% to 19,391.86, its highest closing level since 27 April 2011. Foreign institutional investors (FIIs) bought shares worth a net Rs 878.57 crore on Wednesday, 5 December 2012, as per provisional data from the stock exchanges. India's services sector grew at its weakest pace in over a year during November 2012 due to slowing orders, a survey showed on Wednesday, 5 December 2012. The HSBC services Purchasing Managers' Index, based on a survey of around 400 companies, fell to 52.1 in November from October's 53.8, to register a 13-month low. The 50 level separates growth from contraction compared to the previous month, and while the November reading marked a second straight month-on-month drop, the index has held above 50 for a year now. Business activity expanded at a slower pace in November and new business also grew at a slower clip, which in both cases may partly reflect the fewer working days due to the Diwali, HSBC economist Leif Eskesen said in a statement. Still, firms were more optimistic about the future. The business expectations sub-index jumped almost four points to 72.2 in November from 68.3 in the previous month. The forward-looking business expectation index improved notably, with some respondents reporting planned business expansion, Eskesen said. The services survey also showed prices rose at a steady pace from last month in November 2012. The winter session of the parliament which began on 22 November 2012 has heavy legislative agenda. The key financial sector reforms bills that the government intends to pass this session include insurance and pension bills and the Banking Laws (Amendment) Bill, 2011. The insurance bill will aim to raise the limit for foreign direct investment in the sector to 49% from 26%, while the pension bill will seek to allow foreign investments of up to 49% in local pension-fund managers. The Banking Laws (Amendment) Bill, 2011 includes increasing the voting rights of large shareholders in private banks to 26% from 10%, and giving the central bank more powers. The Reserve Bank of India has held back approvals of new bank licenses, urging the government to first get the bill passed in parliament. Industry body Associated Chambers of Commerce and Industry of India or Assocham in its pre-Budget memorandum for 2013-14 has suggested reduction service tax and excise tax to 8% from 12%, increase income tax deduction of interest on housing loan to Rs 5 lakh and increase in personal income tax exemption limit to Rs 3 lakh to revive consumer demand and boost investment. The excise duty and service tax rates were increased in the last two Union Budgets from 8% to 12%. In a statement issued early this week, Assocham said that the tax base for goods and services has already expanded to generate high revenue and the government can selectively increase customs duty rates to neutralize the effect of lower tax rate of excise duty and service tax. Besides, by increasing customs rates, the government should protect the domestic industry from unfair competition from countries like China, it said. There are cases where goods are being sold in the global market below production cost in highly competitive markets abroad, it said. The industry body has also suggested reduction in the effective rate of corporate income tax to 25% from current 32.45%. It has also suggested increase in the rate of depreciation on plant and machinery to 25% from the existing level of 15% in view of the technologies. Assocham has sought continuation of deduction under 801A (4) to encourage investments in infrastructure during the 12th five-year plan period. The industry body has also sought removal of surcharge and education cesses on corporate assesses and education cess on non-corporate assesses. The Reserve Bank of India next undertakes monetary policy review on 18 December 2012, which is a mid-quarter policy review. After Second Quarter Review of Monetary Policy 2012-13 on 30 October 2012, RBI kept its key policy rate viz. the repo rate unchanged at 8% citing high inflation. At that time, the central bank announced a reduction in cash reserve ratio (CRR) requirement of scheduled commercial banks by 25 basis points to 4.25%. The baseline scenario suggests a reasonable likelihood of further policy easing in Q4 March 2013, RBI said on 30 October 2012. RBI said that the policy guidance will, however, be conditioned by the evolving growth-inflation dynamic. The Congress led UPA government at the Centre has been reduced to a minority government after Trinamool Congress (TMC) withdrew support to the UPA in September 2012. Trinamool Congress withdrew support to the UPA in September this year over the big bang reforms introduced by the Centre which included a cap on subsidised LPG cylinders and 51% FDI in multi-brand retail, among others. The next general elections must be held in India before May 2014. Assembly polls will be held in Gujarat in two phases on 13 and 17 December 2012. Counting of votes of assembly elections in Gujarat and Himachal Pradesh (HP) Pradesh will take place on the same day on 20 December 2012. Assembly polls were held in HP on 4 November 2012. Asian stocks traded mostly higher Thursday, ahead of the European Central Bank (ECB) policy meeting later in the session. Key benchmark indices in Hong Kong, South Korea, Japan and Indonesia were up by 0.07% to 0.66%. Key benchmark indices in Taiwan Singapore and China fell by 0.03% to 0.24%. The South Korean economy grew worse than earlier expected in the third quarter from the prior three months, expanding at the slowest pace in three and a half years, the Bank of Korea's revised data showed Thursday, strengthening the market view that the central bank might cut rates again early next year to underpin growth. The country's quarterly economic growth barely averted contracting in the July-September period by rising a seasonally adjusted 0.1% from the second quarter, according to the revised growth data. It marks the worst quarter since the first quarter of 2009, when the economy also grew 0.1% from the previous quarter. On a year-on-year basis, the economy expanded 1.5% in the third quarter, marking the weakest growth in three years. The reading is worse than the central bank's preliminary estimate in October of a 0.2% on-quarter rise and a 1.6% on-year expansion. US stocks mostly rose Wednesday, as Wall Street applauded what appeared to be a softening of stances in talks to avert the fiscal cliff, but the Nasdaq Composite fell with Apple Inc. The Dow Jones Industrial Average rose 82.71 points, or 0.64%, to 13,034.49 at the close. The Standard & Poor's 500 index gained 2.23 points, or 0.16%, to 1,409.28. But the Nasdaq Composite index fell 22.99 points, or 0.77%, to 2,973.70. Investors are focused on US fiscal cliff. The US fiscal cliff refers to the year-end deadline for the expiration of hundreds of billions of dollars worth of tax cuts and the triggering of $109 billion in across-the-board spending cuts, if the US Congress fails to act. The US Congress created the hazardous deadline of 31 December 2012 in August 2011 when it agreed to a deficit deal as a way out of a deadlock over raising the US debt ceiling. Meanwhile, the European Central Bank (ECB) is likely to keep its benchmark interest rate on hold 0.75% on Thursday but may offer clues on its policy path for next year with updated forecasts likely to present a grim outlook for the euro zone economy in 2013.