Market may open in green

The key benchmark indices may open higher extending the recent gains as most of Asia is in positive. However profit taking may emerge after the recent solid surge in Indian stocks.
Most of the Asian stocks were trading higher today. The key benchmark indices in Hong Kong, South Korea and Taiwan rose by between 0.28% to 1.37%.
China's Shanghai Composite rose 0.32% even as China's exports fell by a record as the global recession cut demand for goods produced by the world's third-largest economy. Overseas sales dropped 26.4 % in May 2009 over May 2008.
Japan's Nikkei fell 0.3% despite Japan's economy shrank less than the government initially estimated as business investment and inventories fell at a slower pace. Gross domestic product shrank at a record 14.2% annual pace in the three months ended 31 March 2009, less than the 15.2 % reported last month, the Cabinet Office said today in Tokyo. Singapore's Seoul Composite fell 0.14%.
Australian employers cut fewer workers than estimated in May 2009, adding to signs the economy may recover faster than other developed nations. The number of people employed fell 1,700 from April 2009, when it climbed a revised 25,400, the statistics bureau said in Sydney today.
The US markets closed flat with a negative bias on Wednesday, 10 June 2009, but well off their intraday lows. Stocks had opened higher, but those gains quickly faded as a jump in oil prices and sharp rise in lending rates spurred worries. The Dow fell 24.04 points, or 0.3%, to 8,739.02. The S&P 500 index fell 3.28 points, or 0.4%, to 939.15. The Nasdaq Composite Index fell 7.05 points, or 0.4%, to 1,853.08.
Crude surged to settle at a seven-month high near 72 dollars a barrel after the energy department said stockpiles of oil dropped by 4.38 million barrels to 361.6 million.
Back home, foreign funds are aggressively buying in Indian stocks. As per the provisional figures on NSE, foreign funds bought shares worth Rs 738.09 crroe on Wednesday, 10 June 2009. FII inflow in June 2009 totaled Rs 4,718.80 crore (till 9 June 2009). FII inflow in calendar year 2009 totaled Rs 25,192.30 crore (till 9 June 2009). On the back of heavy buying by foreign funds, the Sensex has jumped 5,819.50 points or 60.32% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex has risen 7,306.41 points or 89.53%.
Net inflows into domestic equity mutual funds rose to Rs 1,930 crore in May 2009, the highest in 14 months, and more than twice the amount in the first four months of 2009, according to data from the Association of Mutual Funds in India.
Meanwhile, the government reportedly is considering a proposal to restore the rate of service tax to its earlier level of 12%. The government had reduced the service tax rate to 10% in the third stimulus package which was unveiled in February 2009. This option of withdrawing the service tax cut is being weighed on account of spiralling government expenditure, a result of the government's attempts to boost the economy and shrinking revenues due to the slowdown in economic activity,
On the positive front, the government reportedly will stick to the course of disinvestment plans it has charted out despite DMK's opposition to it. Finance minister Pranab Mukherjee will prepare the road map for the programme in his Budget. DMK leader and M Karunanidhi's daughter, Kanimozhi, who had spoken out against disinvestment in the Rajya Sabha during the debate on the motion of thanks to the President's address on Monday, has already clarified that her party will take a case-by-case view on the issue The divestment in three to four companies could be taken up in the immediate run. These include NHPC, Power Finance Corporation and REC report said.
Meanwhile, Finance Minister Pranab Mukherjee on Wednesday said banks should provide credit at reasonable rates to spur growth, saying cuts in official rates by the Reserve Bank of India had not been passed on. This will help restore the environment for rapid growth and ensure that the growth process benefits, he said. Mukherjee said banks have agreed to explore the possibility of reducing rates after a meeting with chiefs of state-run banks.
Interest rates in India are falling thanks to ample liquidity in the banking system, low headline inflation and a loose monetary policy stance of the Reserve Bank of India. However, inflation may rise if oil and metal prices which have risen sharply in 2009 continue to rally.
A change in the Reserve Bank of India's current loose monetary policy stance if and when it takes place may weigh on equities. Investors have been betting that falling interest rates in India may help sustain strong domestic demand and also support a larger capital expenditure programme of India Inc. Late last week, India's biggest private sector bank by net profit ICICI Bank cut prime lending rate by 50 basis points.
Rising metal prices is a cause of concerns for manufacturing companies as their raw material costs may shoot up.
The government's oil subsidy bill may remain high and it could continue to put pressure on the already high fiscal deficit if the government does not resort to decontrol of oil prices. However, the surging rupee against the dollar may mitigate the impact to some extent as India is a major importer of crude.
Petroleum Secretary R.S. Pandey on Wednesday said the government is committed to reforms in fuel pricing but it wants to ensure affordable fuel supply. Pandey's comments come in the backdrop of a newspaper report on Tuesday that the government may defer a proposal to decontrol pricing of gasoline and diesel because of the increase in crude oil prices. Trinamool Congress (TC), a key ally in Prime Minister Manmohan Singh's government, opposes lifting controls on fuel pricing. With her eye on a series of local elections coming up in West Bengal, she told a Bengali television channel on Monday that her party would protest against any move which would result in higher fuel prices.
The government fixes the price of petrol and diesel and compensates state refiners, such as Indian Oil Corporation, HPCL and BPCL by supplying domestic crude oil at a discount and by issuing bonds to shore up their balance sheets.
Any disappointment on reforms may weigh on the stock market at a time when many equity analysts have been raising earnings forecasts of India Inc on hopes that the new government will push economic reforms to boost growth.
The petroleum minister had recently said he will submit a proposal for deregulation of oil products to the Cabinet in six to eight weeks. If government removes price controls on petrol and diesel, it would benefit PSU OMCs and also the government, which has been issuing oil bonds to share PSU OMC's burden. It would also persuade private refiners, such as Reliance Industries and Essar Oil, to reenter the oil-marketing business.
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. Investor expectations from the new government are high. Investors expect financial sector reforms such as increase in the cap on foreign direct investment in insurance sector to 49%, from 26% at present.
Unveiling the agenda of the government, President Pratibha Patil in her speech addressed to a joint session of both houses had last week indicated government's intension to divest stake in state-run firms. The government, however, intends to retain control over state-run firms and will continue to hold at least 51% stake. But some investors are concerned that the government's two key allies viz. the DMK and Trinamool Congress (TC) may oppose economic reforms.
The Prime Minister said the reason behind his optimism was that India's savings rate, which determines the money that can be deployed for development projects, was still high at 35% of gross domestic product (GDP).
Manmohan Singh also sought to allay fears that pump priming of the economy by way of stimulus packages announced earlier and measures that will follow in the ensuing months would fuel inflation. "It (expenditure towards infrastructure) will not add to inflation, but to our economic growth."
According to the Prime Minister, fiscal deficit had increased sharply but even then India had enough resources to spend on flagship programmes thanks to the average annual growth of 8.6% achieved during the past five years. He also said that his government was deeply committed to the agenda listed in the President's address, adding flagship programmes will be further strengthened and public delivery system made more transparent.