Market seen opening firm

Key benchmark indices are seen opening on a buoyant note tracking positive global cues. The SGX Nifty futures for July 2009 expiry advanced 14.50 points in Singapore. However it may give up gains later in the day as forecast of below normal monsoon rains for the first time in four years and recent selling from foreign funds may dampen sentiment.

Rollovers for the derivative contracts for June 2009 series, which expired on Thursday, 25 June 2009, were lower as compared to previous series. As per reports, rollover of Nifty positions from June 2009 series to July 2009 series stood at 55% as compared to 63% in the previous series. Also stock futures rollover slipped to 75% from 77% in the last series

Most Asian markets were trading higher today, 26 June 2009. Key benchmark indices in Hong Kong, Taiwan, South Korea, Singapore and Japan were up by between 0.03% and 0.91%. However China's Shanghai Composite fell 0.25%.

US markets opened lower after weekly jobless claims came in higher than expected on Thursday, 25 June 2009. But strong demand for another treasury auction boosted confidence and markets rebounded. Good set of corporate earnings too helped the markets to bounce back.

The Dow Jones industrial average jumped 172.54 points, or 2.08%, to 8,472.40, snapping a four-day losing streak. The Standard & Poor's 500 Index gained 19.32 points, or 2.14%, to 920.26. The Nasdaq Composite Index advanced 37.20 points, or 2.08%, to 1,829.54

In economic data initial jobless claims jumped by 15,000 to 627,000 last week, higher than the expected 6,00,000 continuing claims crept up to 6.74 million meanwhile, the economy contracted 5.5% in the first-quarter, according to the commerce department.

Back home on the flip side, foreign funds have been in a selling mode recently after aggressively buying during the past three months or so. As per the provisional figures on the NSE, foreign institutional investors (FIIs) sold shares worth Rs 1482.82 crore on Thursday, 25 June 2009 while domestic institutional investors purchased shares worth Rs 1118.05 crore.

Monsoon rains, which runs from June to September, have weakened and are expected to be below normal, Prithviraj Chavan, minister of science and technology, said on Wednesday, 24 June 2009 in a briefing in New Delhi. The India Meteorological Department on 17 April 2009 predicted rains in the June- September period to be near normal. The minister said the 2009 monsoon rainfall would be 93% of the long-term average, lower than an earlier forecast of 96%.

The outlook is among the nation's most widely watched indicator as monsoon rains are a major influence on output of key crops, economic activity and also affects sentiment in the country's financial markets.

The World Bank on 22 June 2009 predicted that the global economy will shrink 2.9% this year, a deeper fall than the 1.7% contraction it predicted in March 2009.

The good news for India is that the World Bank has raised India's growth forecast for 2009 to 5.1% from earlier projection of 4%. It has projected an 8% growth for India in 2010 which will make it the fastest growing economy in the world in 2010, overtaking China's expected 7.7% growth relative to the robust performance prior to the current crisis.

In its semi-annual Economic Outlook released on 24 June 2009, the Organisation for Economic Co-operation and Development (OECD) called on the Indian government to restore fiscal discipline, speed up structural reform and increase sales of public-sector assets.

Brazil, India, China and Russia – collectively, the BRICs – held their first summit in Paris this month, underlining the quartet's growing political as well as economic clout.

The OECD had been forecasting GDP growth for India of 4.3% in 2009 and 5.8% in 2010. OECD said that with the gradual recovery of the global economy and easier financial conditions, growth is projected to gradually regain momentum.

The next major trigger for the market is the Union Budget 2009-2010. Many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will provide thrust on the infrastructure sector and push economic reforms to boost growth. Citigroup expects the economy to grow by 6.8% in the year ending March 2010 (FY 2010) and 7.8% in the year ending March 2011 (FY 2011).

Finance Minister Pranab Mukherjee would present the 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.

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.

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.