Market seen extending four-day advance on strong global cues

Key benchmark indices are seen extending gains for fifth straight session mirroring strong global cues. The SGX Nifty futures for June 2009 expiry was up 18 points in Singapore. However profit booking after the recent sharp rally cannot be ruled out. The Sensex is up 5193.32 points or 53.83% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 6,680.23 points or 81.86%.

The sentiment on the stock market is likely to remain upbeat 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 convened the first session of the 15th Lok Sabha on Monday, 1 June 2009. The session will last till 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.

Most Asian markets were trading higher today, 2 June 2009 as US manufacturing data the previous day reinforced hopes that demand will stabilise, while automakers such as Toyota Motor Co and Honda Motor Co climbed after General Motor's bankruptcy filing removed some uncertainty from the market.. Key benchmark indices in China, Japan, Singapore, South Korea, and Taiwan rose by between 0.64% and 1.07%.

However Hong Kong's Hang Seng index was down 0.35%.

US markets rallied on Monday, 1 June 2009 despite General Motors filing for bankruptcy, as strong manufacturing and construction reports raised hopes of a global economic recovery.

The Dow Jones Industrial Average jumped 221.11 points, or 2.6%, to 8,721.44. The Standard & Poor's 500 Index gained 23.73 points, or 2.58%, to 942.87 and the Nasdaq Composite index rose 54.35 points, or 3.06%, to 1,828.68.

Wall Street was buoyed by a report that said while the manufacturing sector contracted in May 2009, the rate of the slowdown was lower than expected. Construction spending was also up in April 2009, according to a report from the Commerce Department, which said the 0.8% gain was the highest since August 2008

GM filed for bankruptcy on Monday, 1 June 2009 after years of taking heavy losses, becoming the largest-ever US manufacturer to seek court protection. The US government will extend $50 billion of loan to the automaker and will convert it into a 60% stake in the reorganized company, according to a filing in US Bankruptcy Court in New York.

Back home, key benchmark indices extended gains for the fourth straight session to settle at multi-month highs in anticipation of a strong push for economic reforms by the newly-elected United Progressive Alliance (UPA) government.

The BSE 30-share Sensex gained 215.38 points, or 1.47%, to 14,840.63, its highest closing since 9 September 2008. The S&P CNX Nifty advanced 80.95 points, or 1.82%, to 4,529.90, its highest closing since 12 August 2008.

As per the provisional figures on the NSE, foreign institutional investors (FIIs) bought shares worth Rs 279.67 crore on Monday, 1 June 2009 while domestic institutional investors sold shares worth Rs 196.74 crore.