Market may extend Monday's gains on firm Asian stocks; Godrej Properties lists today

The market may extend Monday (4 December 2009)'s gains on firm Asian stocks. US stocks jumped on Monday after U.S. manufacturing expanded at the fastest pace in more than three years.

The government does not need to tighten monetary policy now and risk stalling a nascent economic recovery as inflation pressure was mainly caused by high food prices, the chief economic adviser to the finance ministry Kaushik Basu said on Monday.

Kaushik Basu also said Asia's third-largest economy was likely to return to 9 % growth in the fiscal year 2010/11, after topping 7.5 % in the current year to end-March. "You don't want to have an effect across the board, which increases unemployment, which holds back the growth rate," he said, adding inflation would "peter out" over a few months. "Right now, it is a sector-specific intervention that is needed, which is in food sector and that is what the government is doing," he said.

Basu said the economic rebound seen in the first half of the current year would continue in the December quarter, despite a poor farm output.Basu said India's high savings and investment rates would help sustain the recovery and an annual economic growth rate of 10 percent is possible within "a couple of years".

India's food price inflation was at 19.83 % in the 12 months to 19 December 2009 on supply shortages after the weakest monsoon in 37 years, followed by floods in parts of the country that hit crops.

The Reserve Bank of India (RBI) has said it was worried about a spillover of higher food prices to other sectors, raising expectations of monetary tightening by the central bank to dampen inflationary expectations.

Reserve Bank of India (RBI) deputy governor Shyamal Gopinath said on Monday there have been no concerns on capital inflows.

Meanwhile, the latest data showed that the rate of growth in manufacturing rose for the first time in three months in December 2009, with activity reaching its highest since May 2009 on sharp rises in new work and output. The HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 companies, rose to 55.6 in December from 53.0 in November. The reading was the strongest since May's 55.7, which was the strongest in 2009.

India's exports sector has bounced back with outward trade growing by 18% in November 2009, the commerce ministry said. The export figures turned positive after staying in the red for 13 months. The value of exports in November 2009 jumped to $13.19 billion compared to $11.16 billion.

Data earlier this month showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

Shares of Godrej Properties will list on the bourses today. The company has set issue price at Rs 490.

Most of the Asian stocks rose on Tuesday led by electronics and mining companies, after U.S. manufacturing expanded at the fastest pace in more than three years and commodity prices advanced. The key benchmark indices in Hong Kong, Indonesia, Japan, and Singapore rose by between 0.55% to 0.95%. But, the key benchmark indices in China, South Korea and Taiwan fell by between 0.31% to 0.54%.

US stocks rallied to their highest levels in over a year on the first trading day of 2010 on Monday after a report that showed growth in the manufacturing sectorAll three benchmark indices hit 15 month highs. The Dow Jones Industrial Average gained 155.91 points, or 1.5%, to 10,583.96. The Standard & Poor's 500 index added 17.89 points, or 1.6%, to 1,132.99, while the Nasdaq Composite Index rose 39.27 points, or 1.7%, to 2,308.42.

In key economic data, the ISM's gauge of manufacturing showed growth for a fifth straight month, rising to 55.9 in December 2009 from 53.6 in November. Participants shrugged off the two-month old construction spending data that showed a slightly steeper-than-expected 0.6% monthly decline for November.

Closer home, Indian stocks kicked off 2010 on an upbeat note, with key benchmark indices hitting multi-months high on Monday 4 January 2010 as strong auto sales, a jump in manufacturing activity in December 2009, and the latest data showing a surge in exports in November 2009, underpinned sentiment. The BSE 30-share Sensex rose 93.92 points or 0.54% to 17,558.73, its highest closing since 2 May 2008 on that day.

As per provisional figures on NSE, foreign funds bought shares worth Rs 613.42 crore and domestic funds bought shares worth Rs 2330.25 crore on Monday.