Market may extend last week's strong gains on firm global cues

The key benchmark indices may extend last week's strong gains on firm global cues on receding economic worries after unexpected jump in U.S. housing starts. Encouraging set of numbers by India Inc in Q1 June 2009 may also support market.

Asian stocks advanced, led by commodity and technology shares, after oil and metal prices gained and U.S. housing starts unexpectedly rose. The key benchmark indices in China, Hong Kong, South Korea, Singapore and Taiwan rose by between 0.91% to 2.29%.

After a strong week for Wall Street, US markets ended Friday's (17 July 2009) trade flat. The Dow added 32.12 points, or 0.4%, to 8,743.94. The S&P 500 index slipped 0.36 points, or less than 0.1%, to 940.38, while the Nasdaq composite index rose 1.58 points, or 0.1%, to 1,886.61. For the week the Dow and S&P were up over 7%. Nasdaq gained almost 8%.

On the earnings front, Bank of America, the largest U.S. bank, said second-quarter net income fell 25% to $2.42 billion and warned results would continue to be hurt by troubled loans from credit card, mortgage and business customers due to the weak economy. Citigroup reported a $4.3 billion quarterly profit, thanks to the merger of its brokerage arm into a new venture after struggling to survive the financial crisis. Gain from that sale boosted net income to 4.3 billion dollar compared with a year-earlier loss of 2.50 billion dollars. Revenue rose by 71%, to 30 billion dollars.

General Electric reported a second-quarter profit of 26 cents a share, topping consensus estimates of 23 cents a share. Revenues came in lower by 17%, at 39 billion dollars was slightly below the 42 billion dollars that analysts had predicted.

In economic news, homebuilders made good gains after housing starts and building permits data for June 2009 came in higher than expected.

Back home, Key benchmark indices rallied last week on signs of recovery in global as well as domestic economy. Firm global cues, encouraging start to Q1 June 2009 earnings from India Inc and revival in monsoon bolstered sentiment. Reversing a 9.45% fall in the week ended 10 July 2009, the 30-share BSE Sensex jumped 1240.70 points or 9.19% to 14,744.92 in the week ended Friday, 17 July 2009.

Earnings unveiled by Indian companies so far have been encouraging. The combined net profit of 122 firms rose 60% on 18% rise in sales in Q1 June 2009 over Q1 June 2008. BASF India, Essar Oil, Indo Rama Synthetics, Merck, Sterlite Technologies, Triveni Engineering, JSW Steel among others will announce their quarter ended June 2009 result today.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 142.15 crore and domestic funds bought shares worth Rs 535.36 crore on Friday, 17 July 2009.

Progress of India's annual monsoon may concern investors. Possibility of deficient rains this year raises a risk of low agri output and hence high food inflation. The cumulative seasonal rainfall (from 1st June) till 15th July is 27% below normal levels. It has adversely affected the kharif sowing. The worst hit crops are rice, oilseeds especially groundnut and soyabean—and sugarcane. These are the crops which have seen sharp rise in their prices last year. Spatial distribution and actual rain during July and August are vital to determine its consequences on overall economy. Indian Meteorological Department has already predicted 98% of normal monsoon during August.