Market seen extending five-day rally on strong global cues

The market is likely to open on an upbeat note, extending five-day gains, on strong global cues. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could rise 21.50 points at the opening bell. However, gains may be capped after the government proposed to impose a capital gains tax on all stock market transactions by Indians and overseas funds as a part of changes in tax laws.



The so-called direct tax code (DTC) has proposed abolishing the securities transaction tax (STT) but at the same time suggested taxing gains from investments in the stock market and also equity-linked MF units at the applicable rate of taxation. The DTC has also proposed some taxes on income of foreign funds, treating all incomes from their investments in the stock market in India as capital gains.

Meanwhile, many Indian firms have reportedly paid higher advance tax in Q1 June 2010. Higher advance tax payment normally indicates higher profits for the period under review. Reliance Industries (RIL) has paid Rs 653 crore, an increase of 108 %, while HPCL paid Rs 61 crore, a 307% increase. Bajaj Auto paid Rs 110 crore against Rs 50 crore last year.

Infosys Technologies, the country's second-largest software company, reported an advance tax payment of Rs 275 crore, compared to Rs 230 crore in the previous year. TCS paid Rs 128 crore in advance taxes in Q1 June 2010, up 142% from Rs 53 crore it paid in the April-June period last fiscal.

The country's top consumer goods company Hindustan Unilever paid Rs 75 crore, the same as last the last fiscal year. Advance tax payments by companies during the April-June quarter account for 15% of the total advance tax payable in the fiscal year

The country's top pharmaceutical companies have also paid higher taxes, with GlaxoSmithkline Pharma paying Rs 42 crore against Rs 39 crore in the year-earlier period and Ranbaxy's payments rising to Rs 17.5 crore from Rs 15 crore.

The banking sector was a mixed bag during the quarter. The country's largest bank State Bank of India (SBI) for the first time in many years paid less than a year before. It paid Rs 860 crore against the Rs 1170 crore it paid a year before. Union Bank of India's advance tax payments rose to Rs 168 crore from Rs 104 crore, while ICICI Bank paid Rs 350 crore, the same as it paid in the last fiscal.

Housing finance major HDFC has paid advance tax of Rs 215 crore in Q1 June 2010 verses Rs 175 crore in Q1 June 2009. Private sector lender HDFC Bank has paid advance tax of Rs 315 crore in Q1 June 2010 versus Rs 250 crore in Q1 June 2009.

Mahindra and Mahindra paid Rs63 crore, up 260%, and Tata Motors paid Rs65 crore, more than double last year's outgo. Steel Authority of India (SAIL) paid Rs 362 crore against Rs 344 crore a year before, while Gas Authority of India paid Rs 280 crore against Rs 250 crore. Ambuja Cement's advance tax payment dipped marginally to Rs 65 crore from Rs 70 crore

Asian stocks extended recent gains as a report showing growth in New York manufacturing boosted confidence that a recovery in world's biggest economy will increase corporate earnings. The key benchmark indices in Indonesia, Japan, South Korea, and Singapore were up by between 0.63% to 1.53%. Stock markets in Hong Kong, China and Taiwan are closed today for a holiday.

US markets stocks rallied on Tuesday as the euro gained against the dollar after a number of successful European debt auctions eased investor concerns about the euro zone's solvency crisis. The Dow Jones Industrial Average advanced 2.15% or 213.88 points at 10404.77. Standard & Poor's 500 rose 2.35% or 25.6 points at 1115.23 and the Nasdaq Composite gained 2.76% or 61.92 points at 2305.88.

Back home, the BSE Sensex extended gains for the fifth day in a row to settle at one and a half month high on Tuesday buoyed by good initial batch of first quarter advance tax figures from frontline companies.