Market may consolidate after recent run up; Q1 GDP data eyed

The market may consolidate after a 4.47% rise in the week ended Friday, 28 August 2009. The Central Statistical Organisation's data on India's gross domestic production due on Monday, 31 August 2009 will be the key event to watch out for in the forthcoming week. Besides movements in global markets, foreign funds activity and progress of India's monsoon may continue to influence sentiment on the domestic bourses.

Meanwhile the debut of state-run hydropower firm NHPC would be closely watched as it would set the tone for other companies looking to mop funds through the primary market.

The economy is forecast to have expanded further in the first quarter ended in June 2009, buoyed by services sector output and improving industrial activity. The economy expanded 5.8% in the January-March 2009 quarter.

Meanwhile, the revival in monsoon has lifted sentiment. India's monsoon rains were 5% below average in the week to 26 August 2009, coming in close to normal for the second successive week after a prolonged dry spell, the Meteorological Department said on 27 August 2009. Rainfall since 1 June to 26 August was 25% below normal, improving slightly from a deficit of 26% a week earlier. More than two-thirds of the people live in villages and 60% of the farm land depends on the annual monsoon rains running between June to September.

In mid-August 2009, India Meteorological Department said that the country's monsoon rain will be 87% of the 50-year average, compared with 93% forecast in June.

India's deficient monsoons may affect the inflation outlook more than growth prospects, the Reserve Bank of India (RBI) said on 28 August 2009 adding that prolonged expansionary fiscal and monetary policies threatened to push up prices and eventually crimp growth. In its quarterly review of the monetary policy in late July 2009, RBI said it expects inflation to scale up to around 5% by March 2010.

Meanwhile, state-run Oil India (OIL) is hitting primary market to raise funds. The government has fixed a price band of Rs 950-1,050 per share for the initial public offering (IPO) of Oil India that remains open between 7 and 11 September 2009. OIL will raise up to Rs 4,982 crore at the top end of the price band.

OIL is the second state-run firm to hit the primary market this year after strong investor response to the recently concluded NHPC public offer.

Shares of state-run hydropower generator NHPC will debut on the bourses on 1 September 2009. NHPC had raised Rs 6,048 crore through the recently concluded public issue, which were priced at the top end of the Rs 30- 36 band by the Indian government. The IPO, biggest since the Reliance Power issue in January 2007, was subscribed 23.5 times.

Among the other companies looking to tap the primary market in the coming months include Coal India, Pipavav Shipyard, Indiabulls Power, Cox and Kings, Usher Eco Power, MCX, Globus Spirits, Godrej Properties, ARSS Infrastructure Projects, Pride Hotels, Bharat Sanchar Nigam (BSNL), United Bank, Great Eastern Energy, JSW Energy, Euro Multivision, and Radiant Info Systems.

Equities have risen sharply this year on the back of heavy buying by foreign funds. The Sensex is up 6275.03 points or 65.04% in calendar year 2009 as on 28 August 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 7761.94 points or 95.11% as on 28 August 2009.

Foreign funds have been the key drivers of the recent rally. Their inflow in August 2009 totaled Rs 2467.20 crore (till 26 August 2009). FII inflow in calendar year 2009 totaled Rs 37836.80 crore.

Markets across the globe have been on an upward journey on the back of improved economic data. The UK economy contracted 0.7% the second quarter as the recession prompted companies to cut investment and inventories while consumers scaled back spending. The fall in gross domestic product was less than the 0.8% calculated last month, the Office for National Statistics said on 28 August 2009 in London.

The US economy shrank at an annual pace of 1% between April and June 2009, unchanged from an initial estimate released last month, data on 27 August 2009 showed. Analysts had been expecting a downward revision, with some forecasting a contraction of 1.5%. Consumer spending contracted by at a lower-than-expected 1% in the second quarter. Consumer spending accounts for about 70% of US economic activity.