EGoM meeting on fuel prices in focus

Indian stocks scaled three-week highs on Friday, 4 June 2010, as strong automobile and cement sales in May 2010 indicated that domestic demand remains strong. The barometer index BSE Sensex jumped 1,095.21 points or 6.8% in eight trading sessions to settle at 17,117.69 on 4 June 2010 from a recent low of 16,022.48 on 25 May 2010. A recovery in world stocks aided the strong rebound on the domestic bourses. India's economy is expected to grow 8.5% in the current fiscal year that started on 1 April 2010, after expanding 7.4% in the previous year.

World stocks are hovering near 2-week highs, having recovered from a recent sell-off caused by escalating euro zone debt worries. US non-farm payroll data for May 2010 is widely expected to show recovery is gathering pace in the world's largest economy.

On tap at the beginning of next week is a meeting of an empowered group of ministers (EGoM) on Monday, 7 June 2010, to consider the Kirit Parikh committee recommendations on decontrol of fuel prices. Shares of state-run oil market companies have risen sharply over the past few days on expectations that the government may partially decontrol fuel prices. The Kirit Parikh committee had in February 2010 recommended freeing pump prices of petrol and diesel and raising kerosene prices by Rs 6 a litre and cooking gas prices by Rs 100 a cylinder.

Shares of Hindustan Unilever may remain in focus ahead a board meeting on 11 June 2010 to consider buyback of equity shares.

Investors will eye the first installment of the corporate advance tax payment which will give some clue about Q1 June 2010 corporate results. The first installment of corporate advance tax falls due on 15 June. The combined net profit of a total of 3,556 companies rose 13.7% to Rs 87239 crore on 24.7% rise in sales to Rs 927084 crore in the quarter ended March 2010 over the quarter ended March 2009.

On the macro front, the government will unveil industrial production data for April 2010 on 11 June 2010. Industrial output in March 2010 grew in double digits for the sixth straight month, rising an annual 13.5%. The government will unveil data on inflation based on wholesale prices for May 2010 on 14 June 2010.

The progress of the monsoon will be keenly watched. The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

Monsoon rains were 11% below normal in the week to 2 June 2010, the weather office said on Thursday, 3 June 2010. The June-September monsoon rains hit Kerala on 31 May 2010, a day ahead of schedule. The south-west monsoon usually covers the entire country by mid-July. The weather office in late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season holds key.

Meanwhile, a revenue bounty for the government from the sale of telecom spectrum would help bring down fiscal deficit in the current financial year. The pan-India bid license for Broadband Wireless Access (BWA) spectrum touched Rs 8980 crore on Thursday, 3 June 2010, the ninth day of the auction, which translates into revenue of Rs 26940 crore for the government from the sale of three slots. At this bid price, the total revenue for the government from the 3G and BWA auctions will amount to Rs 94659 crore.

Coming back to stocks, global risk appetite holds key for Indian equities. Euro zone debt worries caused massive outflow of foreign funds from India recently as investors shunned risk. Foreign funds sold shares worth a net Rs 286.77 crore in the first three trading sessions this month, as per data from the stock exchanges. Foreign institutional investors (FIIs) had dumped shares worth a net Rs 12071.14 crore in May 2010.

Domestic funds have bought stocks worth a net Rs 454.79 crore in the first three days this month. Domestic funds bought stocks worth a net Rs 6361.17 crore in May 2010.

The initial public offers of Chennai-based IT company Fatpipe Networks India opens for bidding on Monday, 7 June 2010. The company plans to raise Rs 49 crore through the initial public offering (IPO). The price band for the IPO is Rs 82-85 per share.