Indices To Extend Gains

Sentiment play an important part in the equity markets and it is a known fact that sentiments change very soon. At least the way Indian markets and other global equities are behaving it seems so. While in the preceding week the equities over the globe only moving northwards have started the new week on a positive note. Indian equities were not an exception yesterday closed on a very positive note. The factors like win for BJP in the states of Maharashtra & Haryana, de-regulation of diesel prices and announcement of Gas pricing formula resulted in benchmark indices soaring more than 1%. The Sensex witnessed an up-move of 321.32 points (Up 1.23 %) and closed at 26429.85. The Nifty jumped almost 100 points to close at 7879.40. The impact was seen on the broader markets as well with the BSE Midcap gaining over 1%.

Going ahead it seems that the BJP Government which has no elections due in next one and half year at state levels would be focusing on reforms front. After the gas pricing, yesterday the Government announced some reforms on the Coal front also. The BJP Government has brought in ordinance for the E-Auction of licences of coal mines which were cancelled by Supreme Court recently. The press release suggested that in a move to decide the fate of coal blocks that were de-allocated by the Supreme Court recently, the government has proposed an ordinance to allow e-auction of mines to private players while adding that state-run companies would be allocated mines directly. As per the announcement the process is likely to be completed in three-four months. This is a big positive for the markets in general and sectors like Cement, Steel and Power in particular. However this should not be considered as a denationalization of coal.

While the Indian equities witnessed a smart up move, US markets also moved northwards. US indices rallied for a third consecutive day as optimism over corporate earnings helped a rebound. The S&P 500 Index rose 0.9 % to close at 1903.99. Just to quantify the recovery, through the end of last week, the S&P index had fallen 6.2 percent since Sept. 19. The Dow yesterday added 19.26 points (up 0.1%) to close at 16399.67. The Nasdaq Composite Index added 1.4 %.

While the US Indices moved upwards, the Asian Indices do not seem to be following the same trend. Bloomberg suggested that Asian stocks declined, paring gains after yesterday rising the most in two years, as investors awaited a slew of Chinese economic data and weighed US corporate earnings. While the Nikkei is trading with loss of 0.60%, the Hang Seng is up 0.54%. Shanghai Composite is also up 0.12%. SGX Nifty is also trading on a positive note with gains of 0.24%.

We expect the Indian equities to open on a positive note today. FIIs were the buyers to the tune of more than Rs 1000 crore yesterday. Apart from that a lot of call writing has occurred at 7900 levels. We feel this would act as a major support on down side. Further on the quarterly results part there are hardly any disappointments and financial performance is very much in line with street estimates. The important results announcements today include Biocon, HDFC Bnak, Punjab National Bank and South Indian Bank. All in all the markets are likely to open on a positive note and is likely to stay positive throughout the session.