Tax collections running ahead of full year budgeted estimates: Growth in tax collections (both indirect and direct) is running convincingly ahead of government's budgeted estimates for FY11. While indirect tax collections have grown at 46% yoy (vs. budgeted 29% for FY11), direct tax collections have risen by 14% yoy (vs. the budgeted 11%). The quantum of cyclical rebound in taxes has surprised us positively and should help the government to better manage its fiscal deficit. This, coupled with surprise on non tax revenues front (3G/BWA receipts and likely achievement of disinvestment target), has given enough room to the government to increase its social/ developmental outlays without jeopardising its ability to meet its fiscal deficit target of 5.5% of GDP.

Maintain bullish stance on market with year end Sensex target of 22,000: We remain convinced that over the next six months economic newsflow will remain highly positive. The current run rate in tax collections is a clear manifestation of a robust aggregate domestic demand - which should receive a further boost from the imminent rise in rural consumption on the back of a better-than-expected monsoon season (till date 101% of long term average).

Eoin Treacy's view The Sensex Index consolidated in the region of the upper side of the 10-month range from July and broke upwards last week. It is now a little overextended in the short-term but a sustained move below 17,500 would be required to question medium-term upside potential which looks likely to at least test the early 2008 highs.