Market may snap last two days' losses on positive global cues

The market may recover from last two days' near 5% slide on firm global stocks. However, weak monsoon and spread of the deadly swine flu in the country may cap the upside. Further, there are concerns that strong response to the initial public offer (IPO) of NHPC will suck out liquidity from the secondary market.

A 4-year-old Chennai boy died of swine flu in Chennai after a Pune doctor died of the disease today, 10 August 2009 morning, becoming the fifth fatality of the deadly swine flu in the country. Shares of companies making Tamiflu, the only known anti-viral drug effective to treat to swine flu, may edge higher.

Prime Minister Manmohan Singh on Sunday asked Union Health Minister Ghulam Nabi Azad to step up the preparedness and ensure closer coordination between the Health Ministry and the State governments to check the spread of the highly contagious disease.

Asian stocks rose today buoyed by better than expected US and Japanese data. The key benchmark indices in China, Hong Kong, Singapore and Taiwan rose by between 0.23% to 2.2%.

Japan's Nikkei rose 1.42%. Japanese machinery orders rose for the first time in four months in June 2009 and the current-account surplus widened, the latest signs that the nation's worst postwar recession is easing. Orders rose 9.7% from May 2009, the Cabinet Office said today in Tokyo, more than the 2.6% expected by economists. The surplus more than doubled in June 2009 from a year earlier to 1.15 trillion yen ($11.8 billion), expanding for the first time since February 2008 as exports improved.

US markets surged on Friday, 7 August 2009 on encouraging employment data. For the week, both the Dow and the S&P 500 closed with more than 2% gains. on Friday, the Dow soared 113.81, or 1.2%, to 9,370.07. The broader S&P 500 index rose 13.40, or 1.3 %, to 1,010.48, while the Nasdaq composite index gained 27.09, or 1.4%, to 2,000.25.

In economic news, the jobs report came in better than expected. The report showed 247,000 jobs were cut from non-farm payrolls last month, which was less than the 320,000 expected. The unemployment rate eased for the first time since April 2009 by coming in at 9.4%, down from 9.5%.

Back home, the key benchmark indices fell for the second day in a row on Friday, 7 August 2009 as weak global stocks and below normal rains weighed on investor sentiment. The BSE 30-share Sensex was down 353.79 points or 2.28% to 15,160.24 on that day. Foreign funds on Friday, 7 August 2009, dumped stocks worth a net Rs 1,050.81 crore, provisional data released by the stock exchanges after trading hours showed.

The IPO of NHPC, which opened for subscription on Friday 7 August 2009, was subscribed 3.54 times by 17:00 IST on Friday, data on NSE website showed. The IPO received bids for 594.09 crore shares compared to the issue size of 167.7 crore shares. NHPC is planning to raise Rs 6,040 crore at the upper end of the issue price band of Rs 36. The government kickstarts the divestment process by selling shares in NHPC.

Meanwhile, state-owned NMDC, India's biggest mining company, will reportedly tap the capital market
in two phases. The government will first divest 8.38% of its equity stake through an initial public offer (IPO) in the current financial year, which will be followed by a follow-on offer (FPO) in 2010-11.

Investors continue to bet that the government will undertake economic reforms which may boost economic growth and corporate earnings. The Q1 June 2009 results of India Inc were encouraging, with lower costs helping bottomline growth. The combined net profit of 3,190 companies rose 17% to Rs 73665 crore on 5% fall in sales to Rs 724055 crore in Q1 June 2009 over Q1 June 2008.

But, scanty rains remains a cause of concerns for investors. The South West monsoon rains were 64% below normal in the past seven days to 5 August 2009, dipping for the second straight week at a crucial period for oilseeds and sugarcane, and raising concerns of rising food prices. The total rainfall since the start of season on 1 June 2009 was a quarter below average, the India Meteorological Department said on 6 August 2009. The June-September rains are the main source of irrigation for farms and are crucial for Asia's third-largest economy as more than two-thirds of the people live in villages and 60% of the farm land depends on the annual rains.