Market may gain on positive Asia; Maruti Suzuki eyed

The market may open higher tracking gains in Asia. However volatility may remain high ahead of expiry of futures and options contract for the month of October on Thursday, 29 October 2009.

India's largest car maker by sales Maruti Suzuki India will be in action after it announced on Saturday its net profit rose 92.5% to Rs 570 crore on 46.6% rise in sales to Rs 7080.67 crore in Q2 September 2009 over Q2 September 2008.

Maruti said the company remains cautiously optimistic with regard to volume growth in the near future. It said margins in the future may be under pressure due to hardening of commodity prices and strengthening of the Japanese yen. The company said it continues to focus on cost optimization.

Ranbaxy Laboratories, Tata Motors will announce their Q2 September 2009 result today.

Idea Cellular, Tata Communications, Aban Offshore, Bharati Shipyard, Dabur India, GMR Infra, IDBI Bank, NIIT, TV Today, Union Bank, United Breweries, UB Holdings, United Spirits, Welspun Gujarat among others will announce their Q2 September 2009 result today.

Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August 2009 at 10.4%.Inflation based on the wholesale price index (WPI) rose 1.21% in the year through 10 October 2009, higher than previous week's annual rise of 0.92%, date released by the government on Thursday showed.

The RBI pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. While as exit from the loose monetary policy is imminent, speculation on the bourses is the timing of the exit policy. The RBI is expected to keep its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on 27 October 2009. The Reserve Bank of India (RBI) governor said on Friday he had reviewed the current economic situation with the finance minister, ahead of the quarterly monetary policy review next week.

A section of market expects RBI to raise the cash reserve ratio (CRR), the proportion of deposits that banks keep with the central bank, to tame inflationary pressures in the economy.

Stock and sector-specific activity may dominate trade on the bourses in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.

Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.

Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.

Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.

Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.

Asian stocks gained on Monday on signs the global economy is recovering, reducing demand for the greenback. The key benchmark indices in Singapore, Japan, South Korea and Taiwan rose by between 0.09% to 1.23%. But, China's Shanghai Composite fell 0.23%.

South Korea's economy expanded at the fastest pace in seven years. Gross domestic product increased 2.9 % in the third quarter from three months earlier, when it grew 2.6 %, the central bank said in Seoul today

The earnings-fueled rally fizzled on the Wall Street on Friday as investors began to lock in some profits. The Dow Jones Industrial Average was down 109.13 points, or 1.1%, to 9,972.18. The S&P 500 Index fell 13.31 points, or 1.2%, to 1,079.60. The Nasdaq Composite slipped 10.82 points, or 0.5%, to 2,154.47.

Microsoft's results beat Wall Street expectations. Amazon too reported better-than-expected third quarter profit and stronger sales outlook.

Back home, volatility ruled the roost as the key benchmark notched up small gains on firm global stocks on Friday, 23 October 2009. The BSE 30-share Sensex rose 21.07 points or 0.13% to 16810.81 on that day.

As per provisional data, foreign funds on 23 October 2009, offloaded stocks worth a net Rs 478.80 crore. Domestic funds bought equities worth a net Rs 172.99 crore.

The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary equity market. As per reports, Indian firms have garnered about $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April 2009. Indian companies are taking advantage of a surge in liquidity to recapitalize and fund capital expenditure after being starved of cash last year.

Most of these companies - from industries ranging from liquor and spirits to infotech - issued equity shares to a select group of investors by way of qualified institutional placement or QIP. If the enabling resolutions passed by the companies are any indication, Indian firms are gearing up to raise $15 billion (Rs 69,427 crore) in the next six months. The list includes Hindalco (Rs 2,900 crore), JSW Steel ($1 billion), India Cements ($100 million), Essar Oil ($2 billion), Tata Steel (Rs 5,000 crore), Jet Airways ($ 400 million) and Bharat Forge ($150 million).

Unlisted Reliance Infratel announced on 22 September 2009 its intention to raise Rs 5,000 crore from the primary market. Divestment of state-run firms by the government may also increase the supply of paper in the market.

The government last week approved stake sales in state-run power producer NTPC and another unlisted power firm Satluj Jal Vidyut Nigam which reflects the country's resolve to speed up reforms and raise more resources for social schemes. On Monday, Trade Minister Anand Sharma said the Union Cabinet had approved a 5% stake sale in NTPC, and 10% in, an unlisted power producer. On Friday, 16 October 2009, Prime Minister Manmohan Singh said many state-run firms are eager to list their shares in the stock market as it would help unlock their value.

The government has approved a follow-on public offering of 20% of state run Steel Authority of India, the steel minister said on Wednesday, 21 October 2009. The Government of India owns nearly 86% of Sail.