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Foreigners are determined to push the market higher
Positive comments on India’s economy and growth figures from India’s infrastructure sector boosted market sentiment. Foreigners too showed confidence in the Indian markets by investing a total of Rs1,476.36 crore on 23 December 2009 and 24 December 2009. The Sensex gained 641 points from the previous week’s close.
On Monday, 21 December 2009, the Sensex declined 119 points, ending the day at 16,601, while the Nifty declined 35 points to 4,953, despite reports of higher advance tax figures from India Inc for the third quarter. Indian firms paid 24% more in advance tax for the October-December 2009 period year-on-year, suggesting higher profit growth as economic recovery picked up pace.
The advance tax paid by the top 100 firms was up more than 30% in the December 2009 quarter. The country’s corporate advance tax had fallen by 3.7% in the June 2009 quarter, but grew by 14.7% in the September 2009 quarter due to a strong recovery in banking, auto, and consumer durables sectors.
According to the latest data release from fund-tracker EPFR Global, emerging-market equity funds took in $571.40 million in the week ended 16 December 2009, a slower pace of inflows than that seen earlier in the year.
Still, inflows into developing world stock funds have now surpassed $75 billion for calendar year 2009, well beyond the previous record of $54 billion set in 2007. Meanwhile, diversified global emerging market funds soaked up $404 million and Asia funds, excluding Japan, posted net inflows of $301 million. India equity funds took in $64 million over the week, putting their intake for the year ahead of the previous record of $3.40 billion in 2005.
During the day, finance secretary Ashok Chawla said that there are no plans for any additional borrowing this year and added that not much can be done about food price inflation with steps including monetary policy. Kaushik Basu, chief economic adviser to the finance ministry said that inflationary pressures in India will die out soon. He also added that inflation in India was sector-specific, present in food prices, and would therefore need sectoral intervention.
Companies planning to list may reportedly have to ensure that at least a quarter of their total equity lies with the public, as the government sets about its stated mission to ensure that investors get a wider selection of stocks to choose from. Under the proposed plan, already listed companies will be required to divest at least 5% stake every year from 2010 to reach the prescribed threshold. Under the current rules, companies have the option to go public with 10% or 25% equity dilution. The government is scrapping the rules allowing companies to go for an initial public offering with 10% dilution.
China’s industry minister said that the government will aim for economic growth of about 8% in 2010, even as it faces a tougher time boosting domestic consumption as a driver of growth.
On Tuesday, 22 December 2009, the Sensex closed at 16,692 as it gained 91 points from the previous day’s close, while the Nifty closed at 4,986, up 33 points.
The Confederation of British Industry raised its 2010 economic growth forecast and said that the Bank of England may pause its bond-purchase plan in February 2010. Meanwhile, policy-makers have pledged to print £200 billion of new money to stoke spending and shake off Britain’s longest recession on record.
On Wednesday, 23 December 2009, the Sensex shot up 539 points from the previous day’s close, ending the day at 17,231, while the Nifty closed at 5,145, up 159 points on back of positive comments from the finance minister on economic growth.
During trading hours, finance minister Pranab Mukherjee said that the government will wait until the February 2010 budget to consider withdrawing some of the fiscal stimulus measures. He said that inflation and fiscal consolidation are major challenges in the short- to medium-term. Growth outlook for the second half of FY 2010 looks better, he added. The finance minister also said that farm output must grow 4% for the economy to expand 9%-10% annually. He said that industrial production has started picking up.
Mr Mukherjee said that sustaining higher growth remains a priority for the government and the Centre is open to making changes in the draft direct tax code. The draft code has proposed various reform measures, including cutting corporate tax rate to 25% and streamlining tax laws.
The People’s Bank of China said that the economy’s recovery is still insufficient and that correcting structural problems for the nation’s growth is urgent. The bank also added that it will seek to keep policy flexible and will focus on decreasing economic volatility and managing the pace of loan growth.
On Thursday, 24 December 2009, the Sensex was up 130 points from the previous day’s close, ending the day at 17,361, while the Nifty closed at 5,178, up 34 points.
India’s infrastructure sector grew an annual 5.3% in November 2009, said commerce minister Anand Sharma. Infrastructure sector output grew 3.5% in October 2009 from a year earlier. The sector accounts for 26.7% of the country's industrial output.
The food price index rose 18.65% in the 12 months to 12 December 2009, data released by the government showed. The primary article index jumped 14.66% and the fuel price index rose 3.95%. The worst monsoon in nearly four decades and flooding in some parts of the country have pushed up food prices.
According to US reports, new home sales tumbled 11.3% in November 2009, raising the spectre that previous positive signs in the industry were the result of the government stimulus and were not sustainable. Meanwhile, the US department of treasury on Wednesday said that it has received repayments on its Troubled Asset Relief Program (TARP) investments in Wells Fargo and Citigroup to the extent of $45 billion, bringing the total amount of repaid TARP funds to $164 billion. The US treasury now estimates that total bank repayments should exceed $175 billion by the end of 2010, cutting total taxpayer exposure to the banks by three-quarters.
Markets will remain closed for four days in a row from Friday (25 December 2009) to Monday (28 December 2009) on account of Christmas and Moharram.
This commentary will look at some debt-related issues of Greece and California in their two respective currency zones and then discuss our view of sovereign debt markets for 2010, particularly with respect to the US dollar and euro currency zones. Some strategy guidance for portfolio management of debt will wrap things up.