The key benchmark indices may open in green tracking positive Asia. However, volatility may remain high ahead of expiry of June futures and options contract on coming Thursday. Recent selling by foreign funds may weigh on investor sentiment.
Asian stocks rose today as bank and electronics maker stocks rose after the International Monetary Fund said it will lift its world growth forecasts, overshadowing declines among commodity companies on lower copper and oil prices. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.1% to 2.03%.
The US markets closed Friday's (19 December 2009) session mixed after indices surrendered early gains. Nonetheless, financial stocks and tech stocks showed gains in this session's late advance. The rebound though was not enough to reverse the stock market's weekly loss of 2.6%, the first weekly decline in five weeks. The Dow Jones was down 15.87 points, or 0.2%, to 8,539.73. The broader S&Ps 500 index rose 2.86 points, or 0.3%, to 921.23 and the Nasdaq Composite Index gained 19.75 points, or 1.1%, to 1,827.47.
Back home, interest rates are falling thanks to ample liquidity in the banking system, low headline inflation which has now slipped into negative zone and a loose monetary policy stance of the Reserve Bank of India. However, inflation may rise if oil and metal prices which have risen sharply in 2009 continue to rally.
Finance minister Pranab Mukherjee recently said banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the Reserve Bank of India had not been passed on.
Meanwhile, the data on advance tax payments reported this week for the first quarter of the financial year indicated banks and fast moving consumer goods (FMCG) firms have done well in the first quarter, but realty companies continue to perform badly. Automobile sector have also paid higher taxes this year, show the revenue department's initial estimates. Indian companies paid around Rs 23,000 croe in advance tax for the first quarter of FY 2010, almost flat at the previous year's receipts.
Foreign funds have sold shares last week after aggressively buying during the past three months or so. As per the provisional figures on NSE, foreign funds sold shares worth Rs 29.08 crore on Friday, 19 June 2009. Foreign funds sold shares totaling Rs 1,685.70 crore in four trading sessions from 15 June 2009 to 18 June 2009. FII inflow in June 2009 totaled Rs 4,446.50 crore (till 18 June 2009). FII inflow in calendar year 2009 totaled Rs 25,765.90 crore (till 18 June 2009).
Finance Minister Pranab Mukherjee would present the Union Budget on 6 July 2009. The Railway Budget will be presented on 3 July 2009 and the Economic Survey would be presented on 2 July 2009.
Indian stocks have soared in the past three months on a view that ample global liquidity and a return of risk appetite will help India Inc help raise funds for expansion which in turn will boost corporate profits. India Inc has already raised almost Rs 5,000 crore from three qualified institutional placements (QIPs) so far in 2009 and announced plans to raise another Rs 20,000 crore.
A comfortable victory last month for the Congress-led United Progressive Alliance (UPA) government in elections for the 15th Lok Sabha has raised hopes for economic reforms. Reforms virtually came to a halt in the past five years of the Congress-led alliance government at the centre, when the Communists provided support to the government from outside for a large part of the five-year term. Left parties are opposed to economic reforms.
Investor expectations from the new government are high. Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present.
Unveiling the agenda of the government, President Pratibha Patil in her speech addressed to a joint session of both houses early this month had indicated government's intension to divest stake in state-run firms. The government, however, intends to retain control over state-run firms and will continue to hold at least 51% stake. But some investors are concerned that the government's two key allies viz. the DMK and Trinamool Congress (TC) may oppose economic reforms.
Finance minister Pranab Mukherjee recently said there was a need to find ways to bring the economy back to higher growth path without increasing the fiscal deficit. He said the government would focus on infrastructure, agriculture and employment generating sectors to protect growth and jobs.
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