Market may snap last three days gains on weak Asia

The key benchmark indices may snap last three days gains on weak Asia. India's weak annual monsoon so far this year may further dent investor sentiment.

After a strong revival since 15 August 2009, rains weakened again last week. The South West monsoon rains were 41 % below average in the week to 16 September 2009, the government-run India Meteorological Department said on Thursday. Total rainfall since 1 June 2009, the start of the season, was 21 % below average because of exceptionally dry spells earlier in the season, it said. More than two-thirds of the people live in villages and 60 % of the farm land depends on the annual rains.

Meanwhie, data released by the government on Thursday showed the headline inflation entered the positive territory after a gap of 13 weeks. Inflation based on the wholesale price index rose 0.12% in the year through 5 September 2009 compared to previous week's annual decline of 0.12%. A surge in food price index was responsible for the rise in the headline inflation.

The Reserve Bank of India's deputy governor Shyamala Gopinath hinted on Thursday it was too soon for the central bank to unwind its accommodative monetary policy even though the South Asian economy has shown signs of resilience.

Earlier this week, RBI governor Duvvuri Subbarao sounded a harsher stance. Reserve Bank of India governor that the central bank will not unwind its accommodative monetary policy until the economy is back on high-growth track. Rising inflationary pressures due to a surge in food prices had stoked worries that the central bank may raise rates as early as next month at a quarterly policy review.

Meanwhile, market expectations of strong Q2 results were tempered after a news agency quoted an unnamed government official as saying on Thursday that the government expects only a marginal improvement in corporate advance tax in second quarter.

Media reports had on Wednesday, 16 September 2009, indicated a surge in advance payment by top Indian firms that raised expectations of strong Q2 September 2009 results. As per reports, State Bank of India, India's biggest commercial bank by branch network, has paid Rs 1838 crore in advance tax in the second installment as against Rs 1500 crore paid last year. HDFC Bank paid Rs 425 crore advance tax against Rs 315 crore last year. But, ICICI Bank paid lower tax of Rs 501 crore against Rs 575 crore last year.

Larsen & Toubro paid Rs 210 crore as against Rs 150 crore last year. Reliance Industries paid Rs 1157 crore in advance tax against Rs 683 crore paid in last year. But, Tata Steel paid a sharply lower advance tax of Rs 400 crore Rs 1000 crore paid in last year.

Software major TCS has reportedly paid Rs 220 crore as against Rs 81 crore. Tractor major Mahindra & Mahindra paid Rs 112 crore as against Rs 17.5- crore. Tata Motors paid advance tax of Rs 130 crore in the second installment, much higher than Rs 60 crore last year. Tata Power Company paid Rs 75 crore as against Rs 14 crore in last year.

Meanwhile, the initial public offer (IPO) of the private sector ship builder, Pipavav Shipyard, was fully subscribed within an hour of opening of the issue on Wednesday, 16 September 2009. The IPO was subscribed 3.57 times on second day of the issue on Thursday. The company has allotted 1.52 crore shares to anchor investors at the top-end of the Rs 55-Rs 60 price band.

Asian stocks fell today as Aiful Corp. sought to reschedule its debt payments and metal prices declined. Aiful Corp. said it will try to reschedule debt payments after the financial crisis hurt its ability to raise money. The key benchmark indices in China, Hong Kong, Japan and Singapore fell by between 0.18% to 1.23%. The key benchmark indices in South Korea and Taiwan rose by between 0.07% to 0.26%.

The US markets snapped their winning streak on Thursday, 17 September 2009 after making fresh highs this week. The markets got a boost from an encouraging Philadelphia Fed report earlier in the day but then gave up gains to end in the red. The Dow Jones Industrial Average was down 7.79 points, or 0.1%, to 9,783.92. The S&P 500 index fell 3.27 points, or 0.3%, to 1,065.49, and the Nasdaq Composite Index fell 6.40 points, or 0.3%, to 2,126.75.

In economic news, the Philadelphia Fed said its manufacturing gauge rose to 14.1 in September 2009 from 4.2 in August. This is its first back-to-back monthly gain since October and November of last year.

Initial jobless claims unexpectedly fell last week, dropping by 5,000 coming in at 5,45,000. Continuing claims climbed to 6.23 million from 6.10 million.

A report showed housing starts and permits rose in August to their highest level since November 2008.

Back home, the key benchmark indices scored small gains in choppy trade on Thursday, extending recent strong gains, as global stocks rose. The BSE 30-share Sensex rose 34.07 points or 0.2% to 16,711.11 its highest closing since 22 May 2008.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 2759.46 crore and domestic funds bought shares worth Rs 186.24 crore on Thursday.