Market seen opening firm; RBI's quarterly monetary policy review meet eyed

The market may open on a firm note following mixed global cues. The SGX Nifty futures for July 2009 expiry rose 8.5 points in Singapore. However volatility may be zoom ahead of the Reserve Bank of India's (RBI) quarterly monetary policy review meet today, 28 July 2009. Companies scheduled to announce quarter ended June 2009 results will be in spotlight.

The RBI has revised its FY10 gross domestic product (GDP) growth forecast to 6.5% versus 5.7% it had forecast earlier. In its first quarter review 2009-10 report, a background to the first quarter review of monetary policy 2009-10, which is scheduled be announced today, 28 July 2009, the central bank indicated average inflation in the fourth quarter of FY10 to be at 5.4%.

The Finance Minister Pranab Mukherjee in an address to the Parliament on Monday, 27 July 2009, said India can go back to 8–9% gross domestic product (GDP) growth. For the target to be achieved, the country needed at least 4% farm growth, the minister said. Pointing out that the various stimuli packages the government introduced last year cost the state Rs 2.14 lakh crore, Mukherjee added that the government would use more measures to boost the GDP growth.

The FM also announced a slew of changes of tax measures that included a 1% subsidy on home loans up to Rs 10 lakh, when the overall cost of the house does not exceed Rs 20 lakh.

Meanwhile, bankers expect the Reserve Bank of India (RBI) to maintain a status-quo in its key rates in its quarterly policy meet on Tuesday, 28 July 2009 following surplus liquidity in the banking system and low demand for credit. The central bank is also likely to lay out a more clear roadmap to conduct the government borrowing programme in a smooth manner and may hike the GDP and inflation forecast for the year ending March 2010 (FY 2010).

Earlier, the Reserve Bank of India (RBI) had cut the repo rate, or its key short-term lending rate, by 425 basis points to 4.75% in six steps since October 2008 as it tried to guard a slowing economy against the global financial crisis. The central bank also slashed the reverse-repo rate by 275 basis points since early December 2008 and brought down the cash reserve requirement by 400 basis points to 5% since early October 2008 to keep credit flowing.

Hindustan Unilever, Bajaj Hindusthan, GMR Infra, GVK Power, Kotak Mahindra Bank, Mundra Port, Neyveli Lignite, REC, Tata Tea, BPCL and Grasim, among others will announce their June 2009 quarterly result today, 28 July 2009. The Q1 June 2009 results announced so far have encouraging, with lower costs helping bottomline growth. The combined net profit of 825 companies rose 16% to Rs 45525 crore on 2.5% growth in sales to Rs 351504 crore in Q1 June 2009 over Q1 June 2008.

Equities may remain volatile this week as investors rollover positions from July 2009 contacts to August 2009 contracts ahead of expiry of July 2009 futures and options (F&O) contract on Thursday, 30 July 2009.

Asian markets were trading mixed today, 28 July 2009. Key benchmark indices in Hong Kong, Taiwan, Singapore, rose by between 0.42% and 1.47%. Indices in South Korea, China, and Japan were down by between 0.10% and 0.27%.

US markets ended modestly higher on Monday, 27 July 2009 led by gains in banking shares after a bout of profit taking in early trade. The Dow Jones industrial average rose 15.27 points, or 0.2%, to 9,108.51. The S&P 500 index rose 2.92 points, or 0.3%, to 982.18, while the Nasdaq Composite Index rose 1.93 points, or 0.1%, to 1,967.89.

On the economic front, the new home sales in June 2009 rose the most in more than eight years. Sales spiked 11% to hit a better-than-expected annualised rate of 3.84 lakh units.

Back home, as per the provisional figures on the NSE, foreign institutional investors (FIIs) bought shares worth Rs 439.54 crore on Monday, 27 July 2009 while domestic institutional investors sold shares worth Rs 278.97 crore.

Annual monsoon rains, running between June to September, are seeing a revival after a sluggish start. India's monsoon rains were 15% above normal in the week to 22 July 2009, the second consecutive week of above-average rainfall after an exceptionally dry patch at the start of the season. Total cumulative monsoon, which runs from June to September, was 19% below average, improving from a 27% deficit in the previous week, the India Meteorological Department said on on Thursday, 23 July 2009.

More than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.