Market may extend gains on robust industrial production growth

Data showing robust industrial prodcution growth in July 2010, sustained buying by foreign funds and firm Asian stocks will help domestic bourses score further gains. Indian stocks are currently hovering at their highest level in nearly 32 months. Trading of the S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could gain 41 points at the opening bell.



India's industry began the second quarter on a strong footing, clocking 13.8% growth in July. The growth rate -- the highest in two months -- exceeded market expectations of moderation to 7.8%. The growth was driven by a strong showing by the manufacturing sector, particularly the capital goods segment.

Asian stocks rose on Monday, 13 September 2010, driving the region's benchmark index to a four-month high, after Chinese data released over the weekend reaffirmed market hopes for a soft-landing for the mainland economy and strengthened expectations of a delayed interest rate hike by the Chinese central bank. The key benchmark indices in Hong Kong, South Korea, Taiwan, China, Indonesia, Japan and Singapore were up by between 0.09% to 1.25%.

Banking stocks rose across the Asia-Pacific region as the new capital norms agreed by global regulators were less stringent than feared.

Back home, foreign institutional investors (FIIs) are in a buying spree in India. FIIs bought share worth a net Rs 987.99 crore on Thursday, 9 September 2010, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 201.53 crore on that day.

Foreign funds have bought shares worth a net Rs 2920.73 crore in the first few days this month, as per data from the stock exchanges. The inflow has reached Rs 22415.83 crore in calendar 2010.

Good monsoon rains this season will raise farm output, boost rural incomes and lower food inflation. As a result of the intensification of monsoon since the last week of August, the drought-hit areas of the east and the north-east have received adequate moisture to facilitate planting of alternative, short-duration crops, especially of pulses and fodders, in the fields that had remain unsown so far. This is likely to mitigate the losses due to persistent paucity of rains in this region.

Countrywide, the crop coverage this season has been far better compared to not only the rain-starved 2009 but also to the good rainfall year of 2008. The total area sown under kharif crops till the end of August was 8.3 million hectares higher than in 2009 and 1.15 million hectares more than in 2008 when the country had reaped a record kharif foodgrain harvest of 118.14 million tonnes.

There has been a considerable expansion in acreage under those commodities that have witnessed a perceptible spurt in prices, such as pulses, coarse cereals like bajra and maize, and commercial crops like cotton and sugarcane. On other hand, the area planted with rice and oilseed, the commodities whose prices have remained more or less stable, has come down this year by nearly two million hectares and 700,000 hectares, respectively, compared to that in 2008.

The total water stock in the country's 81 major reservoirs has risen by 9 September 2010 to 103.156 billion cubic metres, some 32% higher than last year's corresponding level and 11% above normal for this time of the season. Many dams have their flood gates opened due to unabated water inflows.

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.

Coming back to stocks, the key benchmark indices attained their highest closing levels in more than 31 months on Thursday, 9 September 2010, on higher European stocks and on gains in US index futures. Data showing sustained buying of Indian stocks by foreign funds and good monsoon rains, underpinned sentiments. The BSE 30-share Sensex was up 132.95 points or 0.71% to 18,799.66, its highest closing level since 18 January 2008.