Market may extend last two days gains on firm global stocks

The market may extend last two days gains on firm Asian markets and overnight surge in US stocks after a positive economic data in US. The government's plan to divest stakes in public sector units will further support the market.

The government on Thursday mandated more sales of shares by state-run firms and changed the rules on how it can use the proceeds, as it seeks to boost revenues and rein in a widening budget deficit.

The government also said it was looking at tax changes as it tried to cut a budget shortfall forecast to hit a 16-year of 6.8 % of gross domestic product in 2009/10 (April/March).The government said all profitable, listed state-run firms must have at least 10 % of their shares in public hands, and unlisted firms that had a positive net worth, no accumulated losses and a net profit over the past three years should list.

The government said the funds from the listings would be spent on social schemes for three years. Currently, proceeds are put in a National Investment Fund and only its dividends are used for funding social security schemes.The government also said it was debating the need for changes in tax laws including on saving schemes, capital gains for non-residents and tax pacts with other nations, as part of reforms to boost revenues. The government has said it will maintain fiscal stimulus until the recovery is secure.

On Thursday, data showed food inflation remained firm at 13.39 % for the 12 months to 24 October 2009. The government said today it will release monthly wholesale price index (WPI) for October 2009 on 12 November 2009 and there will be no more weekly headline inflation data.

Asian stocks rose on Friday paring a weekly loss, after Australia's central bank more than tripled its economic-growth forecast and reports showed U.S. unemployment claims and worker productivity beat estimates. The key benchmark indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan rose by between 0.44% to 1.91%.

U.S. stocks rose sharply on Thursday, with the S&P 500 up four straight days and the Dow closing above 10,000, after a rise in business productivity and a drop in jobless claims boosted confidence in the economy, while strong results from Cisco bolstered tech stocks.

The Dow Jones industrial average was up 203.82 points, or 2.08 % to end at 10,005.96. The Standard & Poor's 500 Index was up 20.13 points, or 1.92 %, at 1,066.63. The Nasdaq Composite Index was up 49.80 points, or 2.42 % at 2,105.32.

Driving the gains in US markets was the day's economic news, non-farm productivity rose 9.5% in its preliminary report, the fastest pace in six years. The latest initial jobless claims total came in 512,000, down 20,000 from the previous week. Continuing claims came in at 5.75 million lower than the previous week.

Back home, the key benchmark indices reversed steep intraday losses and ended firm on Thursday after the US Federal Reserve on Wednesday, 4 November 2009, promised again to keep interest rates exceptionally low for an extended period because it expects only a weak recovery. The BSE 30-share Sensex rose 151.77 points or 0.95% to 16063.90 on that day.

As per provisional data on NSE, foreign funds bought shares worth Rs 126.94 crore and domestic funds bought shares worth Rs 199.50 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.