Market may open in the green

The key benchmark indices set to start the day's trade in green tracking gains in most of Asia. However profit taking after recent solid surge may cap the gains.

Most of the Asian stocks were trading higher today. Japan's Nikkei average hit its highest point in eight months on Monday, buoyed by a weaker yen that pushed up exporters such as Canon Inc and by hopes for a recovery in the U.S. economy after it shed fewer jobs than expected in May 2009. Japan's Nikkei rose 1%. Key benchmark indices in China, South Korea and Singapore rose by between 0.36% to 0.68%. While key benchmark indices in Hong Kong and Taiwan fell by between 0.82% to 1.6%.

Wall Street ended a choppy session on a flat note on Friday, 5 June 2009. The Dow was up 12.89 points, or 0.2%, to 8,763.13. The S&P 500 index was down 2.37 points, or 0.3%, to 940.09, and the Nasdaq Composite Index fell 0.60 points, or less than 0.1%, to 1,849.42.

In the economic data, the unemployment rate jumped to 9.4%, the highest in more than two decades and higher than the 9.2% expected. Non-farm payrolls however, declined much less than expected. Employers cut payrolls by 3,45,000 in May 2009, well below the 525,000-drop expected.

Back home, the Sensex jumped 5456.24 points or 56.55% in calendar year 2009 to 15,103.55 on 5 June 2009 its highest closing since 12 August 2008. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 6,943.15 points or 85.08%.

The recent solid surge in the market materialised as foreign funds' pumped Rs 1,181.60 crore in the month of June 2009 after buying hefty Rs 20,606.80 crore in May 2009 and their inflow in calendar year 2009 stood at Rs 22,501 crore (till 4 June 2009). As per the provisional data on NSE, foreign funds bought shares worth Rs 831.95 crore on Friday, 5 June 2009.

Meanwhile, as a major boost to the capital markets, members of the Securities and Exchange Board of India (Sebi) have reportedly suggested a phased reduction of the securities transaction tax as part of a package of measures to develop the capital markets.

In a 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 this 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.

The government reportedly plans to list only two state-owned companies Oil India (OIL) and National Hydroelectric Power Corporation (NHPC) this financial year through initial public offerings (IPOs) even as it aims to mop up Rs 6,500 crore via disinvestments by the year-end. The government will also dilute its holding in some companies where it holds more than 90% stake, including trading firms MMTC and State Trading Corporation of India (STC), as per a detailed annual disinvestment plan to be presented with the Union Budget in early July. The Budget will also contain the new government's broad sell-off plans for its first three years

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 started on Monday, 1 June 2009. The session will last till 9 June 2009. In all, the Parliament session will have seven sittings.