Market may extend gains on firm global stocks

Key benchmark indices are likely to extend recent strong gains on firm global stocks. After hitting a 14-month high on Monday, 3 August 2009, the barometer index, the BSE Sensex, is within striking distance of the psychological 16,000. Auto and cement stocks may edge higher on higher sales in July 2009

Strong Q1 results from India Inc have triggered a solid recent rally on the bourses in the past few days. The Q1 June 2009 results of India Inc were encouraging, with lower costs helping bottomline growth. The combined net profit of 2839 companies rose 17.4% to Rs 73677 crore on 5% fall in sales to Rs 718185 crore in Q1 June 2009 over Q1 June 2008.

Meanwhile, the government on Monday, 2 August 2009 introduced the Companies Bill, 2009, in the Lok Sabha. When enacted, this will bring about significant changes in the way business is done in India, make it easier to start and close businesses, and protect shareholders. While the Bill was introduced in the Lok Sabha in October 2008, it could not be taken any further. The country went to the polls in May 2009 and the Bill lapsed.

There are sings that the Indian economy is recovering from a slowdown last year. Growth in India's manufacturing activity held steady in July 2009 amid robust local demand and a slight rebound in exports. However, intense competition curbed companies' pricing power even as raw material costs jumped, a survey released during trading hours on Monday, 3 August 2009, showed. The Markit Purchasing Managers' Index (PMI), based on a survey of 500 companies, was at 55.30 in July 2009, little changed from 55.34 in June 2009. It has been above the threshold of 50 -- which separates expansion from contraction -- for four straight months. The new orders index rose to 59.75, its highest in nine months, from 58.56 in June 2009.

But data released by the government on Monday, 2 August 2009 showed that exports fell 27.7% in June 2009 to $12.8 billion, its ninth straight monthly fall. Imports dropped 29.3% to $18.98 billion in June 2009. Exports were down 31.3% at $35.4 billion between April and June this year from the same period in the previous year.

A weak monsoon also remains a cause of concern though. India's monsoon rains were 18% below normal in the week to 29 July 2009, having been above normal in the preceding two weeks. Total rainfall since the beginning of June was 19% below average, the India Meteorological Department said on 30 July 2009. On the flip side, water levels in India's 81 main reservoirs rose to 35% of capacity in the week to 30 July 2009, up from 23% a week earlier and 31% a year ago, government data showed. More than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.

Most Asian markets were trading firm today, 3 August 2009 with Japan's Nikkei average hitting its highest level in 10 months buoyed by exporters such as Advantest Corp after data on the US manufacturing sector underscored optimism that the economy was recovering.

Key benchmark indices in Hong Kong, Taiwan, South Korea, Singapore, and Japan were up by between 0.21% and 0.83%. However China's Shanghai Composite slipped 0.73%

US stocks advanced on Monday, 2 August 2009 to their highest closes since November 2008 following encouraging economic reports from the US and abroad. The Dow Jones Industrial average gained 114.95 points, or 1.25%, to 9,286.56.The S&P 500 index rose 15.15 points, or 1.53%, to 1,002.63. The Nasdaq Composite index increased 30.11 points, or 1.52%, to 2,008.61.

The ISM manufacturing index made its seventh straight increase by coming in at 48.9 for July 2009 versus 44.8 in June 2009. The reading was better than economist expectation of 46.5. Construction spending data for June 2009 made a surprise 0.3% increase. It was expected to fall 0.5%.

Strong inflows from foreign funds has boosted the bourses in the past few weeks. The Sensex is up 6276.92 points or 65.06% in calendar year 2009 as on 3 August 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 7,763.83 points or 95.14% as on 3 August 2009.

Foreign funds bought shares worth Rs 347.01 crore on Monday, 3 August 2009, as per the provisional data from the stock exchanges.

FII inflow in July 2009 totaled Rs 11,625.20 crore. FIIs had bought stocks worth a net Rs 3,224.90 crore in June 2009. FII inflow in calendar year 2009 totaled Rs 36,169.70 crore (till 31 July 2009).