Indices seen snapping two-day gains on weak global cues

Local indices are likely to witness a subdued start, snapping two-day gains, following weak global cues. The SGX Nifty futures for October 2009 expiry was down 33 points in Singapore. Volatility may rise in the truncated trading week, in the absence of any major trigger for sharp movements either side. The government will today unveil data on headline inflation for the year through 22 September 2009. Also the proposed $24 billion merger deal call-off between India's largest mobile services provider by sales Bharti Airtel with South Africa's MTN late evening on 30 September 2009 after the South African government refused to soften its stance on the proposed deal structure may sour sentiment.

Another economic data to be watched out for today is the HSBC PMI data. Also the September 2009 monthly auto and cement sales will started kicking in from today.

Turnover on the bourses may remain low as traders may refrain from building large positions this week because this is a truncated trading week as the market remains closed on Friday, 2 October 2009, on account of Gandhi Jayanti.

The next trigger for the stock market is Q2 September 2009 results of India Inc next month. 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. Infosys kickstarts the reporting season on 9 October 2009.

Coming back to equities, 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 also announced on Tuesday, 22 September 2009, its intention to raise 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.

Meanwhile, the government is reportedly planning to announce a blueprint for selling its stake in state-owned firms in the first week of October 2009. The policy is expected to suggest how the government will eventually bring down its stake in public sector companies to 75% over a period of time.

US markets ended modestly lower on Wednesday, 30 September 2009 on the back of mixed economic data. The Dow Jones industrial average fell 29.92 points, or 0.3%, at 9,712.28. The S&P 500 index fell 3.53 points, or 0.3%, to 1,057.08. The Nasdaq Composite index fell 1.62 points, or 0.1%, to 2,122.42.

In economic data, the Chicago purchasing-manager's index fell to 46.1 in September 2009 from 50 in August 2009 indicating a contraction. Also the jobs data report disappointed. US private employers cut 254,000 jobs from their payrolls in September 2009, more than expected but less than the revised 277,000 loss recorded in August 2009. Meanwhile, the US economy contracted at a 0.7% rate in the second quarter, less than the 1% plus decline expected.

Asian markets were trading lower today, 1 October 2009 on profit booking after the recent rally. Key benchmark indices in South Korea, Japan, Hong Kong, Taiwan, and Singapore were down by between 0.17% and 2.30%. Chinese markets will be shut between 1 and 8 October 2009 for National day and Autumn festival celebrations.

Back home, key benchmark indices extended gains for second straight day on Wednesday, 30 September 2009 on optimism about Q2 September 2009 which will start trickling in from the second week of October 2009. The BSE 30-share Sensex rose 273.93 points or 1.63% to 17126.84, its highest closing since 21 May 2008. The S&P CNX Nifty rose 77.10 points or 1.54% to 5,083.95, its highest closing level since 21 May 2008.

As per the provisional figures on NSE, foreign funds bought shares worth Rs 1074.53 crore and domestic funds purchased shares worth Rs 159.75 crore on Wednesday, 30 September 2009.