Market may open in green tracking positive Asia

The key benchmark indices may open higher on positive Asia. However selling by the foreign funds this week after the recent aggressive buying in Indian stocks may cap gains. The market regulator's series of measures announced yesterday to boost investor confidence in stock markets may support the market.

Asian stocks rose today as better-than-estimated U.S. economic reports boosted the dollar. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.18% to 1.04%.

US markets posted yet another flat close yesterday, however some encouraging economic reports fueled recovery hopes. The market was boosted on treasury announcement of a record 104 billion dollar worth of bond auctions for next week. The Dow Jones industrials rose 58.42 points, or 0.7%, to 8,555.60. The S&P 500 index added 7.66 points, or 0.8%, to 918.37, while the Nasdaq Composite Index slipped 0.34 points, or less than 0.1%, to 1,807.72.

In economic data in US, in weekly jobless claims, even as initial claims nudged higher, continuing claims dropped for the first time since January this year, to 6.69 million. The Philadelphia Fed reported that its index of manufacturing conditions improved to minus 2.2 against minus 22.6 in May 2009.Leading indicators rose for a second consecutive month, climbing 1.2 % in May 2009, the largest gain since March 2004.

Back home, the government reportedly is examining a proposal to enhance accelerated depreciation benefits on companies' investment in new plant and machinery. If accepted, it could give a fillip to fresh investment in productive capital goods, largely plant and machinery, as companies can reduce their tax outgo in that year.

At present, the normal depreciation rate for plant and machinery is at 15% but in the first year in which the investment is made, companies have the option of claiming accelerated depreciation of 35%.

India's capital markets regulator on Thursday unveiled a series of measures to attract investors and boost confidence in the stock market The Securities and Exchange Board of India (SEBI) approved the "anchor investor" concept under which an investor can subscribe to up to 30 % of the quota for institutional investors in an initial public offering. This is in response to the requests of issuers that there was a need for investors with prior commitment who will enhance their ability to sell the issue and bring more confidence. SEBI had also decided to rationalise disclosure in the rights issues offer documents as information relating to the listed company offering such an issue was already available in public domain for investors. The revised disclosure would make the process of rights issue faster for companies and also reduce overall costs for such issues. The market regulator also said entry load for investments in mutual funds would be removed, which is expected to result in increased participation. It would also cut registration fees for market intermediaries by about 50 %.

Inflation based on the wholesale price index declined 1.6% in the year through 6 June 2009 compared with the previous week's annual rise of 0.13%, data released by the government today, 18 June 2009, showed. That's the first drop since December 1978, according to the central bank's monthly data.

Interest rates are falling thanks to ample liquidity in the banking system, low headline inflation 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 last Wednesday 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 in last four days after aggressively buying in the past three months or so. As per the provisional data on NSE, the foreign funds sold shares worth Rs 584.87 crore yesterday, 18 June 2009. Foreign funds sold shares totaling Rs 1,169.80 crore in three trading sessions from 15 June 2009 to 17 June 2009. FII inflow in June 2009 totaled Rs 4,962.40 crore (till 17 June 2009). FII inflow in calendar year 2009 totaled Rs 26,281.80 crore (till 17 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.