Market may extend gains on positive global cues

The market may extend last week's strong gains on firm Asian stocks and on resumption of buying by foreign funds. A weak industrial output data for October 2008 has raised expectations of a suitable policy response from the government and the central bank to shield the domestic economy from the global economic recession. There is an anticipation of a second tranche of fiscal sops from the government and additional interest rate cuts by the central bank.

Meanwhile, the Q3 corporate advance tax payment numbers will indicate India Inc’s outlook for the rest of the financial year. Though advance tax collections were still in the positive territory in sectors such as mining, mineral, engineering, telecom, IT, pharma till September 2008, the turn of events in the last two months have spelt doubts on whether corporate India will be able to maintain their guidance and deposit advance tax in tandem with that of the third quarter last year.

The third quarter advance tax payment is quite significant as companies need to pay 75% of their estimated tax liability for the year by 15 December. That means, if a company finds it difficult to sustain the bottomline for the rest of the year, it will immediately lower its advance tax by the third quarter.

The BSE Sensex vaulted 724.87 points or 8.09% to 9,690.07 in the week ended Friday, 12 December 2008. A strong booster dose by the government, in the form of a fiscal stimulus package for the economy and rate cut by the central bank, aided the rally.

The market sentiment improved following resumption of buying by foreign funds this month. Foreign institutional investors bought shares worth Rs 2048.70 crore in December till, 11 December 2008. They are net sellers of Rs 52688.50 crore in calendar year 2008 so far.

Stocks surged in Asia on Monday, 15 December 2008, on hopes a lifeline may still be given to the struggling US automakers. Key benchmark indices in Hong Kong, Japan, South Korea, China, Singapore and Taiwan were up by between 0.39% to 5.4%. The White House said on Friday, 12 December 20078, the administration would consider using part of the Treasury's $700 billion bailout package for financial institutions to keep the Big 3 automakers afloat after an autos bailout bill failed in the Senate.