Market may open higher on positive Asian stocks; food inflation data eyed

The market may open higher on gains in most of Asian stocks. However, volatility may remain high as investors may look to cash in some profit after recent solid gains in indices. The government will today unveil data on some wholesale price indices for the year through 26 December 2009 viz. the food price index, the primary articles index and the fuel price index.
Commerce and industry minister Anand Sharma has reportedly urged against an immediate rollback of last year's stimulus measures, wading into a debate on the timing of the stimulus exit that has pitted ministries, policymakers and industry on different sides The finance ministry, trying to manage the highest fiscal deficit in 16 years and galloping food price inflation, is keen to do away with the stimulus measures on the grounds that these have helped shepherd India's economy safely out of the worst global economic crisis since the Great Depression.
Finance secretary Ashok Chawla, on Wednesday said continuing stimulus measures wasn't good for the economy, arguing that “too much of stimulus can be injurious to health” and clearly hinting that a rollback of the stimulus measures may be on the cards. However, Mr Sharma urged caution. Mr Sharma said while exports were on the recovery path, a ‘full and sustained' recovery would happen only when demand picks up across the US, Europe and Japan.
The Indian industry on Tuesday urged the government to continue with the fiscal stimulus at least for six months, as withdrawing them could choke faster recovery of the economy.
The government has reportedly decided to come to the aid of select export sectors that are yet to recover from the global meltdown by offering new incentives and expanding the scope of existing packages. Exports broke a 13-month fall in November 2009, growing 18% to touch $ 13.2 billion, but a commerce department study found that sectors such as engineering, handicraft, textile , pharmaceuticals and leather are still under the weather.
Meanwhile, business activity among Indian services companies expanded at its fastest pace in 15 months in December 2009 and helped create more jobs, but the outlook for 2010 is wary, a survey released on Wednesday showed. The HSBC Markit Business Activity Index, based on a survey of 400 firms, rose to 57.41 in December, its highest since September 2008, after slowing to 55.20 in November. The index has been above 50, separates expansion from contraction
Data last month showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.
In a move which could infuse more liquidity in the markets and make it more dynamic, the Securities and Exchange Board of India (Sebi) on Wednesday extended the tenure of contracts in securities lending and borrowing (SLB) to 12 months from one month. At the beginning, the tenure was of only seven days, which was later increased to 30 days.
Most Asian stocks rose on Thursday as the improved outlook for the global economy drove up commodity prices. The key benchmark indices in Hong Kong, Japan, South Korea and Indonesia rose by between 0.07% to 0.16%. But the key benchmark indices in China, Singapore and Taiwan fell by between 0.19% to 0.54%.
US markets closed flat on Thursday ahead of the crucial jobs report on Friday. The Dow Jones Industrial Average was up 1.66 points, or less than 0.1%, to 10,573.68. The broader S&P 500 Index was up 0.62, or 0.1%, to 1,137.14. The Nasdaq Composite Index was down 7.62 points, or 0.3%, to 2,301.09.
The Fed released minutes from its last meeting yesterday which indicated that some members think more stimulus measures for the economy may be desirable. They modestly raised their projection for GDP growth for the second half and into 2011 and said they see lower core inflation in the next few years.
In key economic data, ADP Employment Services data showing the private sector lost 84,000 jobs in December. That was fewer than the 145,000 jobs lost in November, but did exceed the 73,000 expected by economists. And the December ISM service index improved to 50.1 from 48.7 that was registered in November.
Closer home, the key benchmark ended slightly higher to hit 22-month closing highs on Wednesday, 6 January 2010 as firm Asian stocks and expectations of strong Q3 December 2009 results, underpinned sentiment. The BSE 30-share Sensex rose 14.89 points or 0.08% at 17,701.13, its highest closing since 28 February 2008 on that day.
As per provisional figures on NSE, foreign funds bought shares worth Rs 660.55 crore and domestic funds sold shares worth Rs 286.10 crore on Wednesday.