Market likely to extend recent solid surge

The market may extend their twelve-week solid surge in anticipation of a strong push for economic reforms by the newly-elected United Progressive Alliance (UPA) government. Besides global cues, foreign funds activity and the progress of monsoon will also influence market trend. Profit booking cannot be ruled out after a recent solid surge. The BSE Sensex has surged 4977.94 points or 51.59% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 6464.85 points or 79.22%.

The sentiment on the stock market is likely to remain firm following upgrade in earnings of India Inc as thumping victory of the Congress-led United Progressive Alliance (UPA) in the 15th Lok Sabha elections means political stability for the next five years.

Market may see a pre-budget rally on hopes of accelerated economic reforms and pro-reforms announcements. The UPA government's comfortable victory, without the support of the Left parties, has raised expectations that the government may revive disinvestment programme. The Congress party had in its manifesto released before polls promised to go ahead with disinvestment while retaining a majority holding in the state-run companies. Disinvestment programme was earlier put on backburner due to stiff opposition from the Left front.

Also the passage of the Bill to amend the Insurance Act, 1938 is likely to be touched upon in the full Budget likely to be announced in the first week of July 2009. Apart from raising the foreign investment ceiling to 49%, from 26% at present, the Bill had proposed to do away with the stipulation on Indian promoters having to mandatorily sell a part of their holdings after 10 years of operation.

Finance Minister Pranab Mukherjee on 26 May 2009 said that a sustained stimulus to economic growth is possible by next round of reforms. He said reviving growth momentum is a top priority for the government adding that fiscal prudence will also be kept in mind.

Mukherjee said the government will stick to fiscal deficit target of 5.5% of GDP in the current financial year that ends on March 2010 (FY 2010). He said the government is committed to fiscal consolidation in 2-3 years. The minister said he would be able to announce the full-budget for FY 2010 by the first week of July 2009 and try to get it approved by 31 July 2009. He said the common man will be the focus of the government policy.

Meanwhile, the newly elected UPA government will convene the first session of the 15th Lok Sabha from 1 to 9 June 2009. As regards the business of the first Lok Sabha session, the first two days will be reserved for oath of affirmation to the newly elected members. On 3 June 2009, election for the Lok Sabha Speaker would be held, followed by the President's address to both the houses of parliament on 4 June - the date of commencement of Rajya Sabha session. In all, the Parliament session will have seven sittings

Investors will keenly watch President's address to the Lok Sabha on 4 June 2009 which will unveil the new agenda of the government.

Foreign institutional investors (FII) inflow in May 2009 (till 27 May 2009) totaled Rs 17,643.50 crore, with their inflow in calendar year 2009 at Rs 18,356.10 crore. Meanwhile, mutual funds, which are sitting on a large cash pile, are also likely to buy on dips.

Annual monsoon rains, which hit the country's southern coast more than a week ahead of schedule, remained weak and have not advanced northwards, the India Meteorological Department reportedly said on Thursday, 28 May 2009. The annual rain cycle hit the Kerala coast on Saturday, 23 May 2009 and progressed for some time, but has lost pace since Monday, 25 May 2009, reports indicated.

The India Meteorological Department (IMD) on 17 April 2009 forecast a near normal monsoon this year. The IMD said rainfall in the June-September 2009 monsoon season was expected to be 96% of the long-term average. The outlook is among the nation's most widely watched indicator as monsoon rains are a major influence on output of key crops, economic activity and also affects sentiment in the country's financial markets.

Cement and auto stocks are likely to be in action next week as firms announce their May 2009 sales figures.

Hindustan Petroleum Corporation, National Aluminium Company and GMR Infrastructure will declare their March 2009 quarterly results in the week ending 5 June 2009. Aggregate results of 1991 firms showed net profit rose 14.8% on 3.4% rise in sales in Q4 March 2009 over Q4 March 2008.