Market seen extending two-day gains on firm global cues

The market is likely to extend two-day gains following positive global cues. The Dow Jones industrial average advanced to its highest close in 14 months on Tuesday while the MSCI Asia Pacific Index hit a six-week high as Dubai credit risk eased. The S&P CNX Nifty futures for December 2009 expiry were trading 17 points higher in Singapore.

Asian stocks rose for a third day today, 2 December 2009 following rise in commodity prices. Key benchmark indices in Hong Kong, South Korea, China, and Taiwan were up by between 0.55% to 1.14%.

However Japan's Nikkei 225 index dropped 0.17%. The Bank of Japan announced after the market close on Tuesday that it would offer 10 trillion yen ($115 billion) in new short-term funds, but stopped short of more aggressive measures to support the economy. The Bank of Japan's new funding plan fell short of market expectations.

The Reserve Bank of Australia on Tuesday raised its cash rate target by one quarter of a percentage point to 3.75%, further unwinding emergency policy settings no longer appropriate for the country's recovering economy.

US markets kicked off December with a rally posted solid gains, on the heels of a rebound in global share prices, helped by upbeat economic news and fading fears about the Dubai debt crisis. The Dow Jones Industrial Average surged 126.74 points or 1.23% to 10,471.58. The tech-heavy Nasdaq Composite index climbed 31.21 points or 1.46% to 2,175.81 and the broad-market Standard & Poor's 500 advanced 13.23 points or 1.21% to 1,108.86

In key economic news, the Institute for Supply Management said its manufacturing index expanded for a fourth consecutive month in November but at a weaker pace, falling to 53.6% from 55.7 in October.

Dubai World, the holding company at the heart of the Dubai crisis, on Monday announced a restructuring plan involving $26 billion in debt. However, the Dubai government said it was not responsible for Dubai World's debts, dealing a blow to creditors' assumptions that the Arab emirate would guarantee the government-controlled conglomerate's liabilities.

Dubai World, one of the emirate's main state holding companies, last week, asked for a delay on maturities until at least 30 May 2010. The company has total debts of $59 billion, including $3.52 billion of Islamic bonds due 14 December 2009 from its property unit Nakheel.

Back home, Reliance Communications, Reliance Infrastructure and Reliance Natural Resources may come in spotlight on reports of government probe for alleged violations of overseas borrowing rules. Tata Motors' sales jumped 48% to 18,480 units in November 2009 over November 2008. TVS Motors posted a 37% increase to 1.06 lakh two-wheelers. ACC's sales last month fell 4% to 1.66 million metric tons over the previous year.

The government on Tuesday said it would not withdraw the fiscal stimulus, provided in the last one year to help the economy deal with the global slowdown, in the current financial year.

Minister of State for Finance Namo Narain Meena told the Rajya Sabha that the fiscal measures announced by the government and the monetary measures by the Reserve Bank of India were aimed at mitigating the effects of the economic downturn.

Expressing concern over price rise, Finance Minister Pranab Mukherjee on Tuesday said it is mainly due to shortage of essential commodities like pulses, sugar and edible oil. He also suggested strengthening of the public distribution system to provide relief to the common man.

Replying to questions in the Rajya Sabha, Mukherji said the government is regularly monitoring the problem of hoarding and has been holding discussions with state governments on measures to curb it. For checking price rise, Mukherjee said the government has taken measures like reducing import duties on wheat, pulses, maize and raw sugar and banned export of non-Basmati rice.

Exports fell 6.6% to $13.19 billion in October 2009 over October 2008, their 13th straight monthly fall, the government said on Tuesday. Imports dropped 15% from a year earlier to $22 billion. The trade deficit shrunk to $8.8 billion in October 2009 from $11.74 billion a year earlier.

Exports for April-October, the first seven months of the 2009-10 fiscal year, were down 26% at $91.05 billion from the same period in the previous year.

C. Rangarajan, chairman of the prime minister's Economic Advisory Council on Tuesday said the robust growth of the economy in July-September indicated it could expand at around 7% in 2009-10. The latest numbers do indicate that industry and services are growing very strongly, Rangarajan said adding that this could help offset to a very large extent the impact of the decline in agricultural production.

Finance Minister Pranab Mukherjee told parliament on Tuesday that the current trend in inflation in India is a result of a shortage of food items and not due to a demand-push factor. The food articles index rose an annual 15.6% as at 14 November 2009, up from the previous week's 14.6% rise. Weak monsoon and floods in parts of the country have hurt farm output and pushed up food prices. The government is keeping a close watch on futures trading in commodities, Mukherjee said

The finance minister said buoyancy in government's revenue seen earlier may not be there till 2011/12. He said the government will time stake sale in state-run firms so as to get maximum value. He added that there is no plan for a strategic stake sale in state-run firms. The government, last month, decided to cap its holdings in state-run firms at 90% and said it would sell off shares in the firms where this limit was exceeded.

India's manufacturing activity expanded for the eighth straight month in November 2009 but at its weakest pace since March 2009 due to a slowdown in growth of output, new business and employment, a survey showed on Tuesday. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 companies, fell to 53 in November 2009 from 54.5 in October 2009. A reading above 50 means activity expanded during the month.

Meanwhile, after witnessing substantial redemptions and erosion in assets under management (AUM), the mutual funds industry seems to have got its cheer back. The AUM of 22 fund houses, out of 39, have seen an increase of 7% in the overall average in November over the previous month of the same year.

Government data released on Monday showed the gross domestic product (GDP) grew by 7.9% in Q2 September 2009, from 7.1% in the previous year, shattering forecasts as stimulus measures boosted demand and manufacturing activity surged. The economy had registered a 6.1% growth in the first quarter.

Reacting to the GDP figures Montek Singh Ahluwalia, Deputy Chairman, Planning Commission said economic growth forecast for the year to March 2010 may have to be revised upwards as data released on Monday showed a faster expansion in September quarter. He added that there was no serious concern on inflation as of now and conventional monetary policy was unlikely to be effective in curbing food price rise.

Finance minister Pranab Mukherjee on Monday said he expects the economy to grow around 7% in the fiscal year ending March 2010. During the weekend, the finance minister said that Dubai's debt crisis would not affect India much, but the government is keeping a close watch and will act to prevent any fallout.

Key benchmark indices surged for the second running day on Tuesday, 1 December 2009, as markets across Europe and Asia rallied after worries about Dubai's finance woes receded. The BSE 30-share Sensex was up 272.05 points or 1.61% to 17,198.27 and the S&P CNX Nifty was up 89.30 points or 1.77% to 5122

As per provisional data on NSE, foreign funds bought shares worth Rs 579.09 crore and domestic funds sold shares worth Rs 125.07 crore on Tuesday, 1 December 2009.