Market may open lower tracking weak global cues

The key benchmark indices may open lower tracking weak global cues. Recent selling by foreign funds may also weigh on investor sentiment. The reports that government will have a disinvestment road map in place in about three months to bridge the fiscal deficit may however support the market.

Asian markets fell today on doubts over the speedier recovery of the global economy. The key benchmark indices in China, Japan, Hong Kong, South Korea, Singapore and Taiwan fell by between 0.73% to 1.86%.

The US markets closed deep in the red yesterday, 7 July 2009 as stocks fell to their lowest level in 10 weeks amid growing doubts about the economic recovery. The Dow slipped 161.27 points, or 1.9%, to 8,163.60. The S&P 500 index fell 17.69 points, or 2%, to 881.03. The Nasdaq Composite Index lost 41.23 points, or 2.3%, to 1,746.17.

A statement from one of Obama's economic advisors raised concerns about the recovery. Speaking at a seminar in Singapore, one of President Obama's economic advisors, Laura D'andrea Tyson, hinted that she felt the government should plan on a contingency basis for a second round of stimulus.

Back home, putting an end to speculation over the government's agenda on disinvestment, senior finance ministry officials reportedly said the government will have a disinvestment road map in place in about three months, and that it is exploring the option of tweaking the rules that govern the use of these funds.

The government is planning to sell about 10-20% stake in listed blue chip companies. Among those likely to be targeted are ONGC, IOC, NTPC, Bhel and SAIL. Considering that these companies are profitable, selling stakes at the opportune time could fetch the government a neat revenue that could help bridge the fiscal deficit. The cash-strapped government would also look at diluting stakes in already-listed state-run firms while bringing in public offers of others in the coming months, another finance ministry official said. According to the present rules, stake sale proceeds have to be put into the NIF (national investment fund) managed by professional fund managers—and are not treated like other tax and capital receipts of the government. The government can only use the interest from the fund for social schemes and restructuring of ailing PSUs.

The next major trigger for the market is earnings of India Inc. for the quarter ended June 2009. India's second largest IT major by sales Infosys kickstarts the result season on Friday, 10 July 2009.

The key benchmark indices rose 0.9% on Tuesday 7 July 2009 snapping Monday's (6 July 2009) near 6% post-budget losses on a view that a sharply higher government spending in the Union Budget 2009-2010 will aid a recovery in the economy.

Finance Minister Pranab Mukherjee said on Tuesday government spending has to fill a gap left by lower private investment, a day after he sharply raised government spending in the Union Budget 2009-2010 on Monday, 6 July 2009. Higher government spending on infrastructure sector and rural economy will help facilitate recovery in the economy.

Absence of any big bang economic reforms in the Union Budget 2009-2010 had triggered a nearly 6% slide on the bourses amid heavy volumes on Monday. The Union Budget 2009-2010 did not contain any major reforms such as a roadmap to increase foreign direct investment in insurance sector and decontrol fuel prices. Lack of financial sector reforms and a clear roadmap on divestment were other sources of disappointment. The government set an very small target of Rs 1120 crore from divestment for the financial year ending March 2010. A surge in fiscal deficit target added to the market's woes. 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.

The market had expected some announcement on decontrol on fuel prices but the FM only said that a panel will be set up to look into the pricing of petrol and diesel. The market was also surprised by the FM keeping a mum on Foreign Direct Investment (FDI) policy at a time when expectations were running high that the government will announce a roadmap for hike in foreign direct investment in insurance sector to 49% from 24%.

As per the provisional figures on NSE, foreign funds sold shares worth Rs 921.39 crore on Tuesday, 7 July 2009. The foreign institutional investors (FIIs) sold shares worth a net Rs 351.40 crore on Monday, 6 July 2009 when the Union budget was announced by the finance minister.