Market may gain on positive Asia: RIL eyed after 1:1 bonus issue

A surprise bonus issue announced by India's biggest private sector firm by market capitalisation and oil refiner Reliance Industries (RIL) after trading hours on Wednesday may boost the bourses at the onset of the trading session today, 8 October 2009. Reliance, listed in 1978, has so far issued bonus shares thrice in its history - in 1980, 1983, and 1997. The company maintained its dividend for the fiscal year ended March 2009 at Rs 13 a share. Both the bonus and the dividend are applicable to shareholders of the erstwhile Reliance Petroleum, which has been merged with RIL.

RIL also released restated results for 2008-09 to reflect the absorption of Reliance Petroleum effective from 1 April 2008. Corresponding period figures have been restated, but the numbers are not comparable because of the absorption of Reliance Petroleum in the year, the company said. The consolidated net profit stood at Rs 15,296 crore for the year ended 31 March 2009, while total income was Rs 1,53,138 crore. The company had registered a net profit of Rs 15,324 crore (from ordinary activities) in the FY08, the company stated in a filing to the Bombay Stock Exchange.

Meanwhile, government will announce India's annual inflation for the year to 26 September 2009 today. The India's headline inflation stood at 0.83% during the week ended 19 September 2009 compared with 0.37% during the week ended 12 September 2009.

The finance minister Pranab Mukherjeee said on Wednesday, the government needs more time before deciding on an exit from accommodative policy, amid signs the Reserve Bank of India (RBI) is looking to start winding back some of its extraordinary monetary easings. Pranab Mukherjee also said economic growth may accelerate to 7 % in the fiscal year starting April 2010, from an expected rate of 6.3 % in 2009/10.

On Monday, RBI Governer, D Subbarao said while there was broad agreement India needed to wind back some of its easy policy stance, there were risks if the move was mistimed.

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. IT bellwether Infosys kickstarts the reporting season on Friday, 9 October 2009. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. 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. A sharp surge in equity markets may help treasury gains for some banks. As far as IT stocks is concerned the focus in mainly on the guidance from Infosys.

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 advanced for a third day today after Alcoa Inc. reported earnings that beat analyst estimates. The key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.16% to 0.5%.

Chinese markets have been shut since 1 October 2009 for National day and Autumn festival celebrations. Trading will resume on 9 October 2009

The US markets ended mixed on Wednesday, 7 October 2009 as investors took a wait-and-see approach ahead of the start of earnings season. The Dow was down 5.67 points, or 0.1%, to 9,725.58. The S&P 500 index added 2.86 points, or 0.3%, to 1,057.58, while the Nasdaq Composite index rose 6.76 points, or 0.3%, to 2,110.33. Earnings season officially kicked off after the bell in US, with aluminum giant, Alcoa posted a surprise profit on Wednesday through cost cutting and higher aluminum prices after three consecutive quarterly losses.

Wall Street had expected another loss for the aluminum producer but Alcoa said its third-quarter net earnings were $77 million, or 8 cents per share, compared with earnings of $268 million, or 33 cents per share in the same quarter of 2008.

Back home, the BSE 30-share Sensex fell 151.88 points or 0.90% to 16,806.66 on Wednesday, 7 October 2009. As per provisional data on NSE, foreign funds bought shares worth Rs 634.54 crore and domestic funds bought shares worth Rs 301.60 crore on Wednesday.

Meanwhile, a section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.

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 over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 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.

Divestment of state-run firms by the government may also increase the supply of paper in the market. As per recent reports, the government is 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.

Some caution may prevail on the bourses ahead of assembly polls in three states viz. Maharashtra, Haryana and Arunachal Pradesh on 13 October 2009. The counting of votes will take place on 22 October 2009. Stock exchanges would remain shut on 13 October 2009 in view of the General Assembly Elections.