Market set for a shaky start after a recent surge

The key benchmark indices set for a uncertain start today on mixed global cues. Profit taking may not be ruled out after the recent surge in indices. Auto stocks may be in action after posting robust July 2009 sales figures.

The key benchmark indices surged for the second straight day on Friday 31 July 2009 as gains in Asian stocks, and better-than-expected Q1 June 2009 earnings of India Inc boosted sentiment. The BSE 30-share Sensex rose 282.35 points or 1.83% to 15,670.31 on Friday its highest closing since 17 June 2008.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 582.12 crore and domestic funds bought shares worth Rs 316.11 crore on Friday.

The Sensex is up 6023 points or 62.43% in calendar year 2009 as on 31 July 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 7,509.91 points or 92.02% as on 31 July 2009.

With the result season over, the Q1 June 2009 results of India Inc were encouraging, with lower costs helping bottomline growth. The combined net profit of 2563 companies rose 17.2% to Rs 73243 crore on 5% fall in sales to Rs 710803 crore in Q1 June 2009 over Q1 June 2008.

But a weak monsoon remains a cause of concern. 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 Thursday. 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.

Meanwhile, the finances of the government showed improvement during the first quarter of 2009-10 (Q1 June 2009), with the fiscal deficit working out to be 31% of the estimates as compared to 65 % in the corresponding period last fiscal. Against the Budget estimate of Rs 4,00,996 crore for the entire financial year, the fiscal deficit stood at Rs 1,24,302 crore at the end of 30 June 2009. It is to be noted that the fiscal deficit was revised upward at Rs 4,00,996 crore in the full Budget tabled in Parliament on 6 July against Rs 3,32,835 crore projected in the interim Budget in February 2009.

Asian stocks were mixed in volatile trade after manufacturing in China expanded. The key benchmark indices in China, Hong Kong and South Korea rose by between 0.39% to 0.61%. The key benchmark indices in Japan, Singapore and Taiwan fell by between 0.27% to 1.04%.

A Chinese manufacturing index climbed to a one-year high in July as stimulus spending stoked domestic demand, countering a slump in exports.

In the Wall Street action, the Dow pulled off a modest gain on Friday, capping a rocky week and month. Markets stayed in the green for much of the day after the Q2 GDP showed a less than expected contraction. On Friday, the Dow gained 17.15 points, or 0.2%, to 9,171.61. The S&P 500 index added 0.73 points, or 0.1, to 987.48, while the Nasdaq Composite slipped 5.80 points, or 0.3%, to 1,978.50.

In economic news, the advance Q2 GDP report showed that the economy had contracted at an annualized rate of minus 1%. This marks the fourth consecutive quarter of decline. But the number was an improvement from expectations of a 1.4% decline. Personal consumption expenditures fell at an annualised rate of minus 1.2%. This was worse than the expected decline of 0.5%.