A less taxing day for bulls!

When there is an income tax, the just man will pay more and the unjust less on the same amount of income.

One could be forgiven for ignoring deficit monsoon and H1N1 virus (Swine Flu) for a day. The market is likely to welcome upbeat IIP data and the draft of the new Direct Tax Code, especially the scrapping of the STT. A few tax proposals (like the one on capital gains) could cause some heartburn though. The devil is always in the detail. So, don’t pass a judgement on the new tax code in haste.

On the global front, things are much brighter than they have been for a while now. The Fed says that economic activity in the US is “leveling out”. As expected, the US central bank has left key rates unchanged. We expect a gap-up opening and a pleasant day for the bulls. In the near term, concerns on rich valuations and the selling spree by the FIIs could prove to be the party poopers aside from the bad news on monsoon.

Investor sentiment improved around the globe this month, turning bears into bulls in five of the world’s biggest stock markets, says a global survey. So, quite clearly the worst of the recession is history in most parts of the world. But, don’t uncork the bubbly yet, as periodic bad news will test the strength and sustainability of any rally. Weakness will persist for a while in some pockets of the world as well as individual economies before there are sustained signs of a turnaround.

FIIs were net sellers of Rs5.05bn in the cash segment on Tuesday on a provisional basis while the local funds pumped in Rs1.9bn, according to figures published on the NSE's web site. In the F&O segment, the foreign funds were net sellers at Rs1.79bn. On Tuesday, the foreign funds were net buyers at Rs7.04bn in the cash segment. Their net purchases of Indian stocks have crossed $7.3bn year-to-date.

US stocks ended higher on Wednesday after the Federal Reserve held interest rates near historic lows and signaled that the world's largest economy has finally started to stabilize.

The Dow Jones Industrial Average added 120 points, or 1.3%, to 9,361.61, giving up bigger gains. The S&P 500 index rose 11 points, or 1.1%, to 1,998.72. The Nasdaq Composite index advanced 29 points, or 1.5%, to 1,005.81.

Among stock movers, gains were broad-based, with 28 of 30 Dow components rising.

The advance was broad-based, with financial, technology and other shares rebounding after sliding on Monday and Tuesday. Stocks had fallen in anticipation of the Fed meeting, with investors cashing out after several up weeks.

With the exception of a pullback in late June, the S&P 500 has basically been on the rise for five months. Since bottoming in early March, the index has gained 50% through the end of last week.

Wall Street rallied leading up to the Fed announcement as signs of improvement in the housing market pushed investors back into stocks following a two-day retreat. The market seesawed a bit after the FOMC announcement, with the Dow, Nasdaq and S&P 500 pushing towards fresh 2009 highs, before trimming those gains by the close.

As expected, the Fed held the fed funds rate, a key short-term bank lending rate, at historic lows near 0%. The Fed first cut the rate to that level last December.

In the closely watched policy statement, the Fed said it will maintain exceptionally low interest rates for an extended period of time. The bankers said that although economic activity is likely to remain weak, activity is "leveling out" and financial market conditions appear to have improved.

The FOMC statement has a slightly more positive undertone to it than in recent months, but it continued to indicate caution.

The median home price plunged a record 15.6% during the second quarter, versus a year earlier, according to a report from the National Association of Realtors. But on a more upbeat note, the median home price rose 4% in the quarter versus the first quarter of 2009, rising to $174,100 from $167,300.

In another positive sign, homebuilder Toll Brothers said the number of signed contracts rose in its just-completed quarter for the first time in four years, although the dollar value of the contracts fell. The luxury homebuilder also said the percentage of cancelled contracts dropped versus a year ago. Shares gained 14.4%.

A majority of economists think the recession has now ended, according to a Wall Street Journal (WSJ) survey. With manufacturing starting to pick up and the housing market closer to stabilizing, GDP is expected to grow modestly in the third quarter, after falling for four straight quarters.

The trade gap widened to $27 billion in June, the Commerce Department reported. The deficit stood at $26 billion in May, a 10-year low. The deficit was expected to widen to $28.7 billion in June, according to a consensus of economists.

After the close on Tuesday, Applied Materials reported a fiscal third-quarter loss versus a profit a year ago on weaker revenue. However, the results were better than what analysts were expecting. The chipmaker also said it would at least break even in the fiscal fourth quarter and potentially post a profit of up to 4 cents per share. Analysts expect a loss of 5 cents per share. AMAT shares gained 3.3% on Wednesday.

Treasury prices tumbled, raising the corresponding yields as investors reacted to a mixed government debt sale. Treasury's auction of $23 billion in 10-year notes showed demand roughly in line with recent levels, but not as strong as that seen last month.

The selloff pushed the yield on the benchmark 10-year note to 3.71% from 3.67% late on Tuesday.

The government is auctioning $75 billion in debt this week as part of its efforts to reduce the deficit and fuel its recovery efforts. Treasury's Tuesday auction of $37 billion in three-year notes saw stronger demand than other recent auctions. On Friday, Treasury sells $15 billion in 30-year bonds.

US light crude oil for September delivery rose 71 cents to settle at $70.16 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $4.90 to settle at $952.50 an ounce.

In currency trading, the dollar fell versus the euro and gained against the Japanese yen.

July retail sales are due in the morning on Thursday. Wal-Mart Stores reports its results before the start of trade. The Dow component is expected to have earned 86 cents per share, as it did a year ago.

Thursday also brings the weekly jobless claims report from the Labor Department and readings on July import and export prices and June business inventories.

European shares gained ground as oil producers and E.On advanced, although earnings-related losses from Nestle added a bit of pressure. The pan-European Dow Jones Stoxx 600 index rose 1% to 228.70, gaining for the first time in three sessions.

The UK's FTSE 100 index was up 1% at 4,716.76, while Germany's DAX index rose 1.2% to 5,350.09 and the French CAC-40 index added 1.5% to 3,507.24.

Indian markets ended with marginal losses on Wednesday staging a strong recovery towards the last hour of the session. The swift recovery was led by the Realty, Pharma and Auto stocks. Even the Mid-Cap and the Small-Cap stocks attracted buying interest at lower levels.

Index heavyweight Bharti was the star of the day with HDFC Bank, Tata Motors and ITC among the other major gainers. The BSE Sensex recovered almost 320 points and the NSE Nifty recouped almost 100 points from their intra-day low.

Technically, the 50 Day moving average was the crucial level where the Nifty and Sensex both found support at on Wednesday. The Nifty and the Sensex managed to close above the important levels of 4,408 and 14,813 respectively.

India’s industrial production which was announced in afternoon accelerated in the month of June 2009 to 7.8% from 5.4% in the same period last year, the Government said on Wednesday. Markets had expected industrial output to rise 3.8% in the month of June. The Government announced that it has revised the May IIP figure to 2.2% from the provisional estimate of 2.7%.

The BSE Sensex slipped 54 points or 0.4% at 15,020 after touching a high of 15,043 and a low of 14,701. The index opened at 15,953 against the previous close of 15,074. The NSE Nifty ended lower by 14 points to shut shop at 4,457.

In Asia, the Nikkei in Japan ended lower by 1.4% at 10,435 while Australia's S&P/ASX ended flat at 4,343. The Hang Seng index in Hong Kong slipped 3% at 20,435. Shanghai index in China slipped by 4.6% at 3,112.

In Europe, stocks were trading mixed. The FTSE in the UK was flat. The DAX in Germany was up 0.3% and the CAC 40 index in France was up 0.2%.

Coming back to India, among the BSE sectoral indices, the Realty index was the top gainer, gaining 2.1%, followed by the Pharma index that was up 1.3%. The BSE Auto index up 0.3% and the BSE Consumer Durables index was up 0.3%.

On the other hand, BSE IT index ended with losses, down 1.7% followed by BSE Metal index up 1.6%.

The BSE Mid-Cap index erased early losses and ended higher by 0.3% and the BSE Small-Cap index gained by 0.5%.

Within the Sensex, the major losers were Bharti, Tata Motors, DLF, Sun Pharma, JP Associates and HDFC bank. Among the major losers were Tata Steel, TCS, HUL, Infosys, Hindalco and ONGC.

Outside the frontline indices, the big gainers in the broader market were Pantaloon Retail, GMDC, Godrej Industries, Jai Corp, Indian Hotels, Tata Tea and IDFC. On the other hand, losers included REI Agro, M&M Finance, Union Bank, Yes Bank, Max India and Hindustan Zinc.

Shares of Axis Bank marginally gained by 0.5% to Rs870. According to reports, the company plans to issue 10.83mn shares, worth about US$190mn at current prices, to its founders as part of a larger share sale plan to beef up its capital base.

Jaiprakash Power Ventures Ltd and L&T signed an agreement worth Rs40bn for the supply and erection of the Boiler and Steam Turbine and Generator islands for the 2x660MW Jaypee Nigrie Super Thermal Power Project.

Shares of L&T ended lower by 1.5% to Rs1421. The stock opened at Rs1400 and made an intra-day high of Rs1433 and a low of Rs1391. Total traded volumes stood at 0.5mn shares.

Shares of Mphasis ended flat at Rs500. The company announced that it has signed definitive agreement to acquire AIG Systems Solutions Ltd, part of Amercian International Group Inc. AIGSS is an India-based provider of information technology services and solutions to AIG companies worldwide.

The stock hit an intra-day high of Rs522 and a low of Rs484. Total traded volumes stood at 0.32mn shares.

Shares of Orchid Chemical gained by 2% to Rs101 after the company announced the settlement of the patent litigation between Orchid and Schering-Plough relating to Desloratadine Tablets, 5 mg and Desloratadine 2.5 mg and 5 mg Orally Disintegrating Tablets (ODT), the generic versions of Schering-Plough's Clarinex® and Clarinex® RediTabs® allergy medication. The litigation has been pending in the U.S. District Court of New Jersey since September 2006.

Shares of PVR fell as much as 7% after the government announced that it orders to close down movie theatres in Mumbai for three days over a swine flu scare in the city.

Among the other major losers were Inox Leisure which declined 3% to Rs51 and Adlabs fell by 0.5% to Rs314.

Mumbai, India’s commercial hub, shut schools and movie theatres as swine flu-related deaths rose to nine as of yesterday. Schools will close for seven days and malls and movie theatres for three to contain the virus, Prajakta Lavangare, a director general of the Maharashtra state government, said today.

Shares of EClerx Service shot up by over 7% to Rs332 after ~1.3mn equity shares changed hands in two transactions. That accounted to about 6.7% equity of the company. The stock opened at Rs315 and made an intra-day high of Rs340 and a low of Rs315. Total traded volumes stood at 6.5mn shares.