Market may extend Thursday's gains on positive global cues

The key benchmark indices may extend Thursday's (13 August 2009) strong gains on firm global cues. Robust industrial output data announced on Wednesday may further support market amid concerns over scanty rains.

The key benchmark indices soared on Thursday, 13 August 2009 on firm global cues and a surge in industrial production in June 2009 reinforced expectations that the economy is recovering. The BSE 30-share Sensex jumped 498.33 points or 3.32% at 15,518.49 on that day.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 630.94 crore and domestic funds bought shares worth Rs 182.85 crore on Thursday.

Robust industrial production data may offset gloom in the farm sector, India's industrial output expanded 7.8% in June 2009, at the fastest pace in 16 months, beating forecasts by a wide margin, data released by the government during trading hours on Wednesday, 12 August 2009, showed.

India's monsoon rainfall deficit has widened further, increasing the risk of crop damage. Monsoon was 56% below normal in week to 12 August 2009 and was 72% below normal in soya bean growing central region in past one week, India Meteorological Department (IMD) said on Thursday. Monsoon rains were 29% below normal during the period from 1 June 2009 to 12 August 2009. India relies on rain for 60% of its irrigation and on agriculture for 17% of its economy. The weather office chief Ajit Tyagi on Thursday told a television channel that the situation was grim and low rainfall would hurt winter-sown crops as well.

With IMD finally acknowledging that the situation was as bad as 2002, when the failure of monsoon cut the growth rate to 3.8%, Prime Minister Manmohan Singh reportedly on Thursday constituted a Group of Ministers (GoM) on drought and food security. The GoM, headed by finance minister Pranab Mukherjee, has agriculture minister Sharad Pawar, railway minister Mamata Banerjee, petroleum minister Murli Deora and power minister Sushil Kumar Shinde as its members. To begin with, the team will look into how to control the damage caused by the failure of the kharif season.

Inflation based on the wholesale price index declined 1.74% in the year through 1 August 2009, after falling 1.58% in the previous week, data released by the government on Thursday showed. However, the decline in headline inflation is only due to a statistical effect caused by sharply higher prices a year earlier and consumer price inflation remains high. The government revised upwards inflation for the week ended 6 June 2009 to a fall of 1.01% from earlier 1.61% decline.

Meanwhile, India on Thursday signed a landmark free trade agreement (FTA) with 10-member regional grouping The Association of Southeast Asian Nations (Asean) that will eliminate tariffs on around 4,000 products such as consumer electronics, pharmaceuticals, machinery, metals and readymade garments. The pact is a strategic victory for India, which has been trying to intensify its relationship with the region as a counterweight to the regional blocs in North America and Europe. Formal negotiations on liberalising services and investment, however, are yet to begin and the challenge before India is to expedite the process report said.

Asian stocks rose today as higher metal prices and anticipation of more takeovers fueled speculation a five-month rally will continue. The key benchmark indices in Japan, South Korea, Singapore, Taiwan rose by between 0.1% to 1.54%. The key benchmark indices in China and Hong Kong fell by between 0.55% to 1.66%.

The US markets pulled off modest gains in a late rally on Thursday, 13 August 2009 as investors cheered an encouraging business-inventories report, the latest sign that the recession may be winding down. The Dow Jones industrial average gained 36.58 points, or 0.4%, to 9,398.19. The S&P 500 index added 6.92 points, or 0.7%, to 1,012.73, while the Nasdaq Composite Index rose 10.63 points, or 0.5%, to 2,009.35.

Earlier in the session, unexpected economic growth out of Germany and France helped set a positive tone and business inventories for June retreated more than expected. Inventories dropped over a percent to 1.35 trillion dollars, helped by a 0.9% increase in sales. The inventory-to-sales ratio fell to 1.38 from 1.41. But weekly jobless claims rose unexpectedly by 4,000 to 5.58 lakh while continuing claims made a surprise drop to 6.2 million.