Market may open higher

The key benchmark indices may open higher extending recent strong gains tracking positive global cues. Hopes of renewed reforms and rekindled growth by the new government may also bolster investor sentiment. However profit taking at higher levels may cap the upside.

The Sensex jumped 5361.37 points or 55.57% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 6848.28 points or 83.92%. The solid surge in the market materialised as foreign funds' pumped Rs 20,606.80 crore in May 2009 and their inflow in calendar year 2009 Rs 21,818.80 crore (till 3 June 2009). As per the provisional data on NSE, foreign funds bought shares worth Rs 465.34 crore on Thursday, 4 June 2009.

In the political front, President Pratibha Patil addressed to a joint session of both houses on Thursday, 4 June 2009 formally disclosing the agenda of the UPA coalition government. She said that the government would aim to revive economic growth with higher investments in sectors such as infrastructure, while adhering to fiscal prudence. Patil said steps would be taken to encourage foreign investment inflows, list shares of state-run firms and infuse more capital in banks. The government's immediate priority must be to focus on management of the economy that will counter the effect of the global slowdown, she added.

Patil said the new regime will develop a roadmap for listing public sector units, co-ordinate with other countries to bring back illegal money stashed in secret bank accounts, recapitalise public sector banks, and bring in the pension reforms bill.

On the economic front, the government's immediate focus would be on sectors that are adversely hit, especially small and medium enterprises, exports, textiles, commercial vehicles, infrastructure and housing.

There are reasons to believe that the recent strong rally may continue. For one, equity analysts are raising earnings forecasts of India Inc on hopes that the new government will focus on infrastructure sector and push economic reforms to boost growth.

The investors expect a pre-budget rally over the next one month on hopes of accelerated economic reforms and pro-reforms announcements. The UPA government's comfortable victory, without the support of the Left parties, has raised expectations that the government may revive disinvestment programme. The Congress party had in its manifesto released before polls promised to go ahead with disinvestment while retaining a majority holding in the state-run companies. Disinvestment programme was earlier put on backburner due to stiff opposition from the Left front.

Finance Minister Pranab Mukherjee is likely to present the Union Budget in the first week of July 2009 with focus on ‘Aam Admi' while providing special attention to sectors hit hard by global crisis. Railway Budget for the year 2009-10 would be presented on 1 July 2009 followed by Economic Survey on 2 July 2009.

Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present. Finance Minister Pranab Mukherjee on 26 May 2009 said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind.

Mukherjee said the government will stick to fiscal deficit target of 5.5% of GDP in the current financial year that ends on March 2010 (FY 2010). He said the government is committed to fiscal consolidation in 2-3 years. The minister said he would be able to announce the full-budget for FY 2010 by the first week of July 2009 and try to get it approved by 31 July 2009. He said the common man will be the focus of the government policy.

Congress candidate Meira Kumar was elected Speaker of the 15th Lok Sabha unanimously on Wednesday, 3 June 2009. Kumar is the first woman to be elected as the Speaker of the Lok Sabha. The first session of the 15th Lok Sabha on Monday, 1 June 2009. The session will last till 9 June 2009. In all, the Parliament session will have seven sittings.

Asian stocks gained today with the MSCI Asia Pacific Index set for its third weekly advance, after BHP Billiton Ltd. and Rio Tinto Group said they're forming an iron- ore venture and the yen fell to its lowest in a week. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.26% to 0.95%. China's Shanghai Composite down 0.05%.

The US markets advanced on Thursday 4 June 2009 as a report showed jobless claims fell last week and banks gained. The Dow Jones Industrial Average gained 74.96 points, or 0.9%, to 8,750.24. The S&P 500 index rose 10.70 points, or 1.2%, to 942.46, and the Nasdaq Composite rose 24.10 points, or 1.3%, to 1,850.02.

In economic news, initial jobless claims fell by 4,000 last week. Continuing claims fell to 6.73 million. It's the first time that it has declined since early January 2009, following 17 straight weeks of record highs. However, retail sales data disappointed. May 2009 sales reports from the nation's largest retailers showed 76% of retailers missed estimates.