Market may extend gain

Key benchmark indices may extend gain as Congress Parliamentary Party leader Dr Manmohan Singh readies to stake claim at the centre today. Recent buying by the foreign funds aid the sentiment. Positive Asia may also support the market. However profit taking may not be ruled out after recent solid surge.

Manmohan Singh was renominated as Congress Parliamentary Party leader on Tuesday (19 May 2009) and is expected to stake claim today to head the new Government of the UPA which saw BSP and SP scramble to give it unexpected support to have 44 seats more than the required majority. The 76-year-old economist-turned-politician is likely to be sworn in on Friday 22 May 2009, a day after the 18th death anniversary of Rajiv Gandhi.

Singh may stake claim to be the Prime Minister for a second term after meeting of the leaders of the UPA today where he is likely to get a formal backing of the ruling Congress-led alliance.

Singh was named by Congress President Sonia Gandhi as the CPP leader and Leader of the Rajya Sabha after she was unanimously elected its Chairperson on Tuesday.

As the top Congress leadership discussed modalities of government formation on Tuesday, the UPA's tally in the new Lok Sabha rose by 55 to touch a comfortable 316 mark after it received an unexpected bonus in the form of support from BSP and SP besides some other parties and independents.

The Congress-led UPA defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake in the recently concluded Lok Sabha election. Congress' alliance took 261 seats, sweeping aside its nearest rival, the bloc led by the Hindu-nationalist Bharatiya Janata Party (BJP), which won only 159 combined. Congress, which alone won 205 seats, needs a handful of partners to reach the 272 seats needed to take power, and is expected to seek the support of more smaller parties or independents.

Dr Manmohan Singh met President Pratibha Patil on Monday and submitted the resignations of his Council of Ministers. Manmohan Singh formally stepped down as the Prime Minister. President Pratibha Patil on Monday dissolved the 14th Lok Sabha with immediate effect and asked the Prime Minister and his Council of Ministers to continue in office till the new government is formed.

Financial sector reforms are likely to get a push in the coming days, which were relegated to the back seat due to persistent opposition from the Left parties, with the Congress-led UPA set to form the next government.

A near term trigger for the market will be allocation of portfolios in the new government. It remains to be seen who gets the key ministries viz. power, transport and education sectors likely to be decided at the crucial UPA meet scheduled to be held in New Delhi today. Analysts say growth in these three sectors are key for India to achieve strong economic growth. If those seen as strong performers are given charge of these three ministries, the market may extend gains.

Meanwhile, key government departments have drawn up a slew of proposals to populate an ambitious reform agenda for the first 100 days of Manmohan Singh's second term, as the re-elected UPA coalition talks up expectations and sets itself up to be judged early into its new stint in power.

The BSE Sensex crawled up marginally on Tuesday, 19 May 2009 extending gains for the second straight day after Indian stocks had witnessed a historic rally on Monday, 18 May 2009, when the key indices viz. the Sensex and the Nifty surged more than 17% each on hopes a new stable government will be able to push reforms. The Sensex has risen 4654.72 points or 48.24% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the has Sensex has surged 6,141.63 points or 75.26% to 14,302.03 its highest closing since 11 September 2009 on Tuesday 19 May 2009.

Foreign funds have aggressively bought Indian stocks
in the recent past. As per the provisional figures on NSE, foreign institutional investors (FIIs) bought shares worth Rs 4,792.56 crore and domestic funds sold shares worth Rs 1964.19 crore on 19 May 2009. FII inflow in May 2009 totaled Rs 10,324 crore (till 18 May 2009) while their inflow in calendar year 2009 totaled Rs 10,680.50 crore.

Meanwhile, raising funds from the bourses may soon become a simpler, shorter process, as the market regulator reportedly plans an overhaul of existing norms to raise funds by way of IPO, QIP and rights issue taking them closer to standard global practices.

Asia stocks were flat today as investors trim positions with investors reluctant to keep a near three-month rally in risky assets going without more good economic news. Key benchmarkm indices in Japan, South Korea, Singapore and Taiwan rose by between 0.43% to 0.88%. While key benchmark indices in China and Hong Kong fell by between 0.09% to 0.12%.

The US markets ended a rocky session mixed on Tuesday 19 May 2009 as banks rally fizzled and an unexpected drop in the housing starts left investors a little shaky. The Dow Jones Industrial Average shed 29.23 points or 0.34%, to close at 8,474.85 and the S&P 500 Index lost 1.58 points or 0.17%, to 908.13. However, the Nasdaq Composite gained 2.18 points or 0.13% at 1,734.54.In the economic news, housing starts tumbled 12.8 % to 458,000 units in April 2009 over April 2008. Building permits for April 2009 hit a rate of 4,94,000. Both marked record lows.