Market seen reversing four day declining streak on firm global cues

Key benchmark indices are seen ending their four-day declining trend on the back of firm global cues. The SGX Nifty futures for September 2009 expiry rose 12.5 points in Singapore.

US markets snapped their four-day losing streak on Thursday, 3 September 2009 as investors were encouraged by some better-than-expected retail-sales reports. Financials rebounded after taking a beating on Wednesday. The Dow gained 63.94 points, or 0.7%, to 9,344.61. The S&P 500 index added 8.49 points, or 0.9%, to 1,003.24, while the Nasdaq Composite Index rose 16.13 points, or 0.8%, to 1,983.20.

In economic news, the ISM reported its service-sector index rose to 48.4 in August 2009 from 46.4 in July 2009, slightly above expectations. Initial jobless claims fell 4,000 last week, roughly in-line with estimates. Continuing claims however, jumped to 6.23 million from 6.14 million.

Asian markets were trading mixed today, 4 September 2009. Key benchmark indices in South Korea, Singapore and Japan were down by between 0.45% and 0.83%. However indices in China, Hong Kong, and Taiwan rose between 0.20% and 0.62%.

Back home, analysts are concerned that a sharp surge in food prices due to scanty rains may stoke inflationary pressures in the economy. Interest rates could rise on higher inflation which in turn may impact a nascent economic recovery and corporate profits.

Poor rains will impact agricultural sector. However, its impact on the economy may not be much due to falling share of agriculture. The monsoon witnessed a revival in the second half of August 2009 but the cumulative rains were still a quarter below average till last week. Drought or drought-like conditions have been declared in 278 districts or 44% of the nation's total, as rainfall has been 25% below average so far in the four- month monsoon season that started on 1 June 2009, the farm ministry said on 27 August 2009.

Farm secretary T. Nanda Kumar on Wednesday 2 September 2009 said improved monsoon rains in recent days will boost crop prospects for rice and sugar cane. He said other crops would also gain.

A slowdown in the manufacturing sector and falling exports remains a cause for concern. A latest survey showed India's manufacturing activity expanded at its slowest pace in five months in August 2009. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 companies, fell to a five-month low of 53.2 in August 2009 from a revised reading of 55.4 in July 2009. The new orders index fell to 56.2 in August 2009, also its lowest in four months, from 60 in July 2009.

The PMI has been above 50, which separates expansion from contraction, for five months. Before that, it shrank for the five months through March 2009, hitting a trough of 44.4 in December 2008.

India's gross domestic production (GDP) grew 6.1% in Q1 June 2009 compared with the year-earlier, figures released by the Central Statistical Organisation announced on Monday, 31 August 2009, showed. The segment grouping financing, insurance, real estate and business services led growth in GDP, gaining 8.1% on year. The category including trade, hotels, transport and communication was also up 8.1%.

The GDP growth was lower than 7.8% achieved in Q1 June 2008 but it accelerated from the 5.8% expansion in Q4 March 2009.

Stocks have risen sharply this year on increased global risk appetite triggered by hopes of a recovery in the global economy after a setback from a financial sector crisis. The Sensex is up 5751.02 points or 59.61% in calendar year 2009 as on 3 September 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 7237.93 points or 88.69% as on 3 September 2009. FII inflow in calendar year 2009 totaled Rs 39321.36 crore (till 2 September 2009)

The key benchmark indices extended losses for fourth straight trading session on Thursday, 3 September 2009 underperforming firm global stocks on worries a surge in food prices may stoke inflationary pressures in the economy. The BSE Sensex has lost 524.01 points or 3.29% in the last four days after gaining for seven straight days.

As per the provisional figures on NSE, foreign funds sold shares worth Rs 72.69 crore and domestic funds bought shares worth Rs 382.49 crore on Thursday, 3 September 2009.