Market may gain on positive Asia

The market may gain on positive Asia after US stocks rose overnight on better than expected result. Congress party-led alliance's clean sweep in elections in Maharastra and Arunachal Pradesh may provide support to market.

Ruling Congress party-led alliance won two state polls on Thursday and were set to form the government in a third, a result that gives more room for the alliance to push economic reforms. Elections were held last week in Maharashtra, northern Haryana and Arunachal Pradesh in polls seen as a major test for the Congress coalition after a strong victory in central polls in May.The party retained power in Maharashtra and Arunachal Pradesh, and were expected to hold on to power in Haryana.

Energy major Reliance Industries will be in action as company commenced its initial arguments in the high-profile dispute on Tuesday, saying a private agreement signed between the Ambani brothers is not binding on the company and it can sell gas only at the price set by the government.

Anil Ambani's Reliance Natural Resources claims the contract is valid and wants the court to direct Reliance Industries to supply it with 28 mmscmd of gas for 17 years at almost half the government-set price of $4.2 per mmBtu. The Supreme Court will resume hearing the case next Tuesday, with Reliance Industries expected to conclude its initial arguments by Thursday. The court will then hear arguments by Reliance Natural, following which it will consider a petition by the government to become a party to the dispute.

India's largest power maker by sales Bharat Heavy Electricals unveils its Q2 result today. Strong project execution, fall in input costs and lower employee costs are seen driving growth in Bhel's top line and bottom line in Q2 September 2009. Metal prices were sharply on year on year basis which will help boost margins of the power equipment major. Further, Bhel had provided Rs 116 crore for wage hike provisions in Q2 September 2008 which had pulled down profit in that quarter. The margins will rise with no such provision in Q2 September 2009.

A total of seven brokerages expect a between 10.8% to 32.4% growth in Bhel's net profit at between Rs 681.50 crore to Rs 815.40 crore in Q2 September 2009 over Q2 September 2008. Their expectations peg a between 24.8% to 28% growth in revenue at between Rs 6667.70 crore to Rs 6838.60 crore in Q2 September 2009 over Q2 September 2008. Bhel unveils Q2 September 2009 results on Friday, 23 October 2009.

India's largest cigarette maker by sales ITC unveils its Q2 result today. Higher volumes and price hike in the mainstay cigarette business is seen driving bottom line and top line growth of ITC in Q2 September 2009. However, the hotels business was hit by swine flue and margins of the FMCG business were under pressure due to higher sugar and wheat prices.

A total of five brokerages expect a between 8.3% to 19.2% growth in ITC's net profit at between Rs 869.50 crore to Rs 956.50 crore in Q2 September 2009 over Q2 September 2008. Their expectations peg a between 6% to 10.8% growth in sales at between Rs 3989.10 crore to Rs 4170.10 crore in Q2 September 2009 over Q2 September 2008.

Dr Reddys Laboratories, NTPC, Punj Lloyd, IDFC, JSW Steel, Zee Enterprises, Zee News, Edelweiss, 3i Infotech, GSK Consumer, Pantaloon Retail, Titan Industiries, TVS Motor Company Ajmera Realty, Alphageo, Bata India, Bharat Forge, Birla Corp, Century Textiles, Compact Disc, Core Projects, Cyber Media, Electrosteel Castings, Four Soft, Gateway Distriparks, Gemini Communication, Graphite India, Greaves Cotton, Gujarat State Petronet, Indian Bank, ING Vysya Bank, Mirc Electronics, Tata Sponge, Technocraft, Tips Industries, Titagarh Wagons, Welspun India among other will announce their Q2 September 2009 result today.

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. Within the WPI, the food articles index rose 13.34%. The government revised upwards inflation for the year through 27 August 2009 to a much smaller fall of 0.21% from an estimated 0.95% decline.

The Prime Minister's economic advisory council said on Wednesday that it sees inflation at around 6% by the end of the current fiscal year to March 2010. 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%.

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.

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 shares nudged higher on Friday on the back of upbeat earnings reports from the United States and Asia while the dollar resumed a broad slide after a Fed official indicated U.S. interest rates would remain low. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.6% to 1.81%.

US markets rallied on Thursday as investors cheered some better than expected earnings and shrugged off a disappointing jobless report. Financials led the rally after travelers reported its profit more than quadrupled. The Dow gained 131.95 points, or 1.3%, to 10,081.31. The S&P 500 index rose 11.51 points, or 1.1%, to 1,092.91. The Nasdaq rose 14.56 points, or 0.7%, to 2,165.29.

In the day's economic news, jobless claims rose 11,000 to a seasonally adjusted 531,000 last week, more than expected. An index of leading economic indicators rose 1% in September, touching a two-year high and more than the 0.8% expected.

Closer home, the key benchmark indices extended losses for the third straight day on weak global markets and rise in headline inflation above the 1% mark on Thursday. The BSE 30-share Sensex fell 219.43 points or 1.29% to 16789.74 on that day.

As per provisional data on NSE, foreign funds sold shares worth Rs 499.28 crore and domestic funds sold shares worth Rs 18.07 crore on Thursday.

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 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 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.