Indices Likely To Extend Gains

Indian equities bounced back sharply yesterday and almost recouped all the losses it had witnessed on Monday. The Sensex moved upwards by 128 points to close at 26881 and the Nifty closed with gains of 36 points at 8027. We had yesterday stated that the all eyes would be on the FOMC meet happening on 28th October and 29th October 2014. This particular would have kept most of the equity indices under check.

While the FOMC meet was one reason behind the equity in investors remaining cautious globally, on the domestic front there were some positive factors. The World Bank commented that it sees India’s economic growth quicken to 5.6 percent in FY15 (from earlier levels of 4.7 percent in FY14) driven by accelerated reforms and expeditious clearances of large projects, adding growth will accelerate further to 6.4 percent in FY16.

Apart from this another factor was In a mark of confidence on the Indian e-commerce sector Japanese telecom and internet giant Softbank group announced investment of USD 627 million in Indian online retailer Snapdeal. Softbank chairman Masayoshi Son said they will invest USD 10 billion in India over the next 10 years. This clearly indicates towards the fact that India is fast emerging as destination for new businesses as well.

As for the US markets, a lot depends on what stance is taken by the Fed on the interest rates. We have been consistently saying that the rate hike would only occur in the first quarter of CY15. Apart from that we are expecting a complete closure of bond buying program. Apart From the Fed meet it is the quarterly results season which is making an impact on the equity indices in US markets. The results season has been good with most of the companies beating the street estimates. Bloomberg suggested that, almost 79 percent of S&P 500 companies that have reported so far have beaten earnings estimates, while 62 percent have surpassed revenue projections. Profit for S&P 500 companies rose 6.3 percent in the third quarter and sales increased 4.1 percent, analysts predicted. The US equity indices moved northwards yesterday. The Dow was up by 1.12% (Up 188 points) the S&P also made an up-move of 1.19% (up 23.42 points).

Taking cues from the US markets even the Asian indices are trading in green. While Nikkei is trading with gains of 1.36%, Hang Seng is trading with gains of 1.02%. Shanghai Composite is also trading with gains of 0.41%. After long time it is been seen that all Asian Indices are trading in green. SGX Nifty is also trading on a positive note with gains of 0.50%.

Considering all the factors and the fact that the Supreme Court has asked to announce the list of all names involved in the Black Money trails, we feel the indices are likely to extend gains. However volatility is likely to increase as it is F&O expiry tomorrow. We expect the leading equity indices to open in green and then remain in positive zone for rest of trading session.