Market may gain on positive Asia; RIL eyed

The market may extend recent strong gains on positive global cues on earnings optimism. The market reopened after a long holiday. A special one hour Muhurat trading was held on Saturday on the bourses to mark the beginning of the new Samvat year as per the Hindu calendar. The market remained closed on Monday, 19 October 2009 on account of Diwali.

Sesa Goa, Tech Mahindra, Apollo Tyres, Gati, Polaris Software, Radico Khaitan, Sterlite Technologies, Subex Azure, JK Paper, Nectar Life, Prakash Industries, TVS Electronics among others will announce their Q2 September 2009 result today.

Index heavyweight Reliance Industries will be in action as the Reliance Industries (RIL) and Reliance Natural Resources (RNRL) gas dispute is scheduled to be taken up by the Supreme Court in an afternoon hearing today. A three-judge bench, headed by Chief Justice K G Balakrishnan and comprising Justices P Sathasivam and RV Raveendran, will hear the case. Raveendran replaces Justice B S Chauhan. This is the first hearing on the case after Anil Ambani offered to make peace with Mukesh Ambani. The younger brother had earlier accused the Ministry of Petroleum and Natural Gas of siding with Mukesh.

RIL had first moved the apex court, challenging the decision of the Bombay High Court delivered on 15 June and which had asked RIL to provide 28 million metric standard cubic metres per day (mmscmd) of gas to RNRL at a price of $2.34 per million British thermal unit (mBtu).The government had also moved a special leave petition in the case, asserting its right on pricing and distribution of natural gas. RNRL argued that the government has no role to play either in the utilisation or the fixation of gas price on its contract with RIL.However, RIL has contended that it was only a contractor for the gas from the KG-D6 block and did not have the power to fix the price.

Meanwhile, the government on Monday 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 federal cabinet approved a 5 % stake sale in NTPC, and 10 % in, an unlisted power producer. On Friday, 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.

India's cabinet approved a plan to release the key wholesale inflation number every month rather than on a weekly basis to improve the measurement of price movements. The new wholesale price index with 2004 as the base year will debut on 14 November 2009, Commerce Minister Anand Sharma said. The base year used for the current weekly index is 1993.

Inflation based on the wholesale price index (WPI) rose 0.92% in 12 months to 3 October 2009, slightly above previous week's annual rise of 0.7%, data released by the government on Thursday showed.

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 at 10.4 %.

Stock and sector-specific activity may dominate trade 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.

The aggregate net profit of 169 companies announced so far rose 21.1% to Rs 7624 crore on 7.5% rise in sales to Rs 46895 crore in Q2 September 2009 over Q2 September 2008.

Asian stocks rose, today as earnings reports boosted confidence in the global recovery. The key benchmark indices in China, Hong Kong, Japan, South Korea, Siingapore and Taiwan rose by between 0.15% to 1.19%.

US markets rallied to new 2009 highs on earnings optimism on Monday, 19 October 2009. The S&P 500 closed just shy of the 1100 mark. The Dow added 96.28, points or 1%, to 10,092.19. The S&P 500 index rose 10.23 points, or 0.9%, to 1,097.91. The Nasdaq Composite Index rose 19.52 points, or 0.9%, to 2,176.32.

In important earnings from the US, tech major Apple's profit and sales beat analysts' forecasts. The company reported fourth quarter earnings at nearly 2 dollars a share, up from little over a dollar per share in the same period last year. This was above analyst estimates of around 1.4 dollars per share.

Closer home, the key benchmark indices closed the Muhurat trading session held on Saturday to mark the start of new Hindu year on a flat note after an upbeat start. The BSE 30-share Sensex rose 3.19 points or 0.02% to 17,326.01, its highest closing since 16 May 2008 on that day after gaining 0.74% on Friday.

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.