Market may hold firm on expectations of good Q2 results

Optimism about Q2 September 2009 results may keep equities firm even as traders will refrain from building large positions due to a truncated trading week. The market sentiment remains firm on more signs of a recovery in the economy and on sustained buying by foreign funds. A fund raising spree by Indian companies has aided the rally that took the Sensex to a 16-month high on 22 September 2009 but a strong pipeline of initial public offers (IPOs) may suck liquidity from the secondary market.

Firm global stocks have supported domestic bourses and investors here will continue to take cues from overseas markets. The MSCI world equity index hit a 11-month recently on optimism that world economies were rebounding.

In a clear sign of the strength of the industrial comeback, the government's excise duty collection 22.7% in August 2009 over July 2009, Chairman of Central Board of Excise and Customs V Sridhar said on 25 September 2009.

There is optimism about Q2 September 2009 results after advance tax collections registered a positive growth in the second quarter after witnessing a negative growth in the first quarter. Corporate advance tax and advance personal income-tax were up by 14.7% and 1.7%, respectively in the September 2009 quarter. IT giant Infosys kickstarts the earnings reporting season on 9 October 2009.

Among top Indian firms, State Bank of India (SBI) paid advance tax of Rs 1,832 crore in the September 2009 installment, 17.4% higher than Rs 1,560 crore it paid in same period last year. Bharti Airtel's advance tax outgo rose by a whopping 220% to Rs 484 crore in second installment while Infosys registered a 100% increase in its advance tax payment to Rs 300 crore. Similarly, Mukesh Ambani-led Reliance Industries registered a 69% jump in its tax payment to Rs 1,157 crore and Maruti Suzuki paid 97.76% higher tax at Rs 265 crore in the second installment.

Meanwhile, foreign funds are aggressively buying Indian stocks. FII inflow in September 2009 totaled Rs 12,694 crore (till 23 September 2009). That was much higher than their purchases worth Rs 4028.80 crore in the whole of August 2009. FII inflow in the calendar year 2009 totaled Rs 52,891.70 crore (till 23 September 2009).

The stock market remains closed on Monday, 28 September 2009, on account of Dasara and then again on Friday, 2 October 2009, Gandhi Jayanti.

A section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

As per one report, companies plan to raise at least Rs 40,000 crore through initial public offers (IPOs)/follow on public offers (FPOs) in the second half of the current financial year. Power companies such as GMR Energy, Indiabulls Power and JSW Energy and state-run Bharat Heavy Electricals and NTPC are likely to tap the primary market. Reliance Infratel plans to raise about Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest.