IMF's upward revision in India's growth projection may support market

The key benchmark indices may see a uncertain start today. The International Monetary Fund's upward revision in India's growth projection by 0.9 % point in calendar 2009 and 2010 may however support the market. However, recent selling by foreign funds may weigh on investor
sentiment. India's wholesale price index (WPI) for the 12 months to 27 June 2009 will be announced by the government today. India's wholesale price index fell 1.3% in the 12 months to 20 June 2009, compared with the previous week's annual decline of 1.14%. The global cues were mixed.

The International Monetary Fund (IMF)'s latest World Economic Outlook said the global economy is likely to decline 1.4 %, slightly steeper than the 1.3 percent contraction it saw in April 2009 in calendar 2009, however it foresaw a stronger recovery next year. Economic growth could hit 2.5 % in 2010, a more optimistic figure than the 1.9 % the IMF reported in April. The International Monetary Fund (IMF) has revised upwards India's growth projection by 0.9 % point in calendar 2009 and 2010 because of positive impact from fiscal and monetary stimulus packages. The multilateral financial institution now expects Asia's third largest economy to grow at 5.4 % in calendar 2009, compared with 4.5 % projected in April this year. In 2010, the Indian economy is expected to grow at a much faster rate of 6.5 %.

Recently, the Economic survey for 2008-09 projected Indian economy to expand by 7% with a range of 0.75 percentage point on either side.

In the economic front, India's car sales rose an annual 7.8 % in June 2009 over June 2008, climbing for a fifth straight month and reinforcing the country was one of the few markets where demand has been picking up.

Global rating agency Standard & Poor's Ratings Services on Wednesday said it maintains its view that India's high fiscal deficits are not sustainable in the medium term and if fiscal consolidation is delayed, there is a risk that the sovereign credit ratings on India may be lowered. S&P ranks India's long-term local-currency rating at BBB-, their lowest investment grade.

Finance Minister (FM) Pranab Mukherjee set a sharply higher fiscal deficit target to 6.8% for the financial year ending March 2010 after he increased spending on roads, power and aid to the poor.

Asian markets were trading mixed today. The key benchmark indices in Singapore, South Korea and Taiwan rose by between 0.48% to 1.82%. The key benhchmark indices in China, HongKong and Japan fell by between 0.28% to 0.84%.

Meanwhile, China's passenger-vehicle sales rose 48 % in June 2009 over June 2008, the biggest jump since February 2006, as tax cuts and government subsidies helped the nation extend its lead over the U.S. as the world's largest auto market this year.

The US markets ended flat yesterday, 8 July 2009 after a seesaw session as investors
rotated into defensive stocks. The Dow Jones industrials rose 14.81 points, or 0.2%, to 8,178.41. The S&P 500 index fell 1.47 points, or 0.2%, to 879.56 and the Nasdaq Composite Index rose 1 points, or 0.1%, to 1,747.17.

On the economic front, some positive news came out of the housing sector. Demand for US mortgages rose 11% last week as mortgage rates again receded.

Back home, the BSE 30-share Sensex fell 401.30 points or 2.83% to 13,769.15 on Wednesday, 8 July 2009. As per the provisional figures on NSE, the foreign funds sold shares
worth Rs 828.01 crore and domestic funds bought shares worth Rs 594.07 crore on that day.