Market may gain on positive Asia

The key benchmark indices may extend Monday's (12 October 2009) gains on positive Asia. The stock market remained closed on Tuesday, 13 October 2009, on account of assembly election in Maharashtra. Investors may take further cues from the ongoing Q2 September 2009 results of India Inc. HDFC Bank, IndusInd Bank, Motilal Oswal, Parsvnath Developers, Ashapura Minechem, Bajaj Finserv, Camlin, Can Fin Homes, Container Corporation of India, Gruh Finance, Infotech Enterprises, Rallis India, Sonata Software, Transformers & Rectifiers among others will announce their Q2 September result today.

Industrial production (IIP) rose a robust 10.4% in August 2009, government data showed on Monday. It is the fastest pace of growth in 22 months. Manufacturing output rose 10.2%. The government revised upwards industrial production growth for July 2009 to 7.2% from an earlier estimated 6.8%.

India's economy can expand 7 % in 2009/10, and the Reserve Bank of India (RBI) must weigh the trade-off between growth and inflation when it reviews policy settings later this month, a top government adviser Arvind Virmani said on Tuesday. The forecast for the fiscal year ending March is higher than 6 % estimated by the RBI and private analysts, and the 6.3 % predicted by government's Planning Commission.

Planning Commission deputy chairman Montek Singh Ahluwalia said on Monday industrial growth is set to improve in the second half of the 2009/10 fiscal year. Finance Secretary Ashok Chawla said he expects trend in industrial production to continue and expects better numbers in September 2009. Abhijit Sen, a member of the government's Planning Commission said industrial output will not slow down in coming months. He, however, said farm output is expected to be lower by 2.5% in 2009/10 from the previous year.

Prime Minister Manmohan Singh said on Sunday that the worst is over for the Indian economy, and measures to control the sharp rise in food prices are taking effect. Singh, also said he was confident the harvest will be normal, despite the weakest monsoon since 1972 that has ravaged rice and sugarcane fields. Singh had said earlier the Indian economy is likely to grow at 6.3 to 6.5 % in the fiscal year to March 2010, or a seven-year low. He said economic stimulus measures will continue since the economy is not operating at full capacity.

Commerce and Industry Minister Anand Sharma said on Tuesday Indian exporters still face weak demand from Europe and the United States, so they are setting their sights on new markets. Many domestic sectors are experiencing "double-digit" growth despite the drop-off in exports, he said.

Meanwhile, the IPO of Indiabulls Power was subscribed 5.95 times on the first day of the issue on Monday. Indiabulls Power, a unit of Mumbai-based developer Indiabulls Real Estate, is developing five thermal power plants in western and central India, with total capacity of 6,600 megawatts, and will use the issue proceeds to fund two projects. The issue closes on Thursday, 15 October 2009.

The company has allotted 6.11 crore shares to anchor investors at Rs 45 per shares, at the top end of the Rs 40 to Rs 45 price band for the IPO.

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.

Cement firms too are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.

Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.

Banks are seen reporting a sedate growth in core lending. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.

Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.

Asian stocks rose on Wednesday after a better- than-estimated sales forecast at Intel Corp. boosted technology shares, offsetting a decline among financial companies. The key benchmark indices in China, Hong Kong, South Korea, Singapore and Taiwan rose by between 0.22% to 1.93%.

China's exports declined at the slowest pace in nine months, helping government efforts to sustain the recovery in the world's third-biggest economy. Shipments dropped 15.2 % in September from a year earlier, the customs bureau said compared with a 23.4 % slide in August.

But, Japan's Nikkei average lost 0.25% on Wednesday, dented by a slide in bank shares such as Mizuho Financial Group after their U.S. peers fell ahead of earnings reports from several major banks this week.

U.S. stocks weakened on Tuesday as disappointing sales from Johnson & Johnson stirred jitters about the strength of earnings, snapping the S&P 500's six-day winning streak. The Dow Jones industrial average declined 14.74 points, or 0.15 % to end at 9,871.06. The Standard & Poor's 500 Index slipped 3 points, or 0.28 % to 1,073.19. But the Nasdaq Composite Index inched up just 0.75 of a point, or 0.04 % to 2,139.89.

Johnson & Johnson beat Wall Street's earnings expectations, but reported revenue that was below forecasts, sending its shares down 2.4 %.

Intel reported its third quarter earnings after markets closed. Both profit and revenue substantially outpaced expectations its third quarter revenue came in at above 9 billion dollars. The company forecasts fourth-quarter sales of around 10.1 billion dollars. It put its fourth-quarter gross margin at around 62%.

Back home, the key benchmark indices surged on Monday led by index heavyweight Reliance Industries (RIL) on optimism for a patch-up between warring Ambani brothers and on better-than-expected industrial output data for August 2009. The BSE 30-share Sensex rose 384.01 points or 2.31% to 17,026.67 on that day.

As per provisional data, foreign funds on 12 October 2009, bought equities worth a net Rs 963.13 crore. Domestic funds sold stocks worth a net Rs 274.88 crore

A section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.

The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

As per one report, companies plan to raise over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 22 September 2009, its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest.

Divestment of state-run firms by the government may also increase the supply of paper in the market. As per recent reports, the government is planning to announce a blueprint for selling its stake in state-owned firms in the first week of October 2009. The policy is expected to suggest how the government will eventually bring down its stake in public sector companies to 75% over a period of time.