Market Likely To Open Positive Despite Negative Global Cues

Indian stock markets cheered the RBI’s surprise move to cut repo rate with benchmark Sensex yesterday zoomed by 728.73 points in its biggest single-day rally in over 5 years to reclaim the 28,000-mark on massive buying across sectors. The Sensex closed higher by 2.66% at 28,075.55, while the Nifty ended higher by 216.60 points (2.62%) at 8,494.15. This is Sensex’s biggest gains since 9 May 2014 in terms of percentage points, while in terms of points, it logged its biggest gain since 18 May 2009.

Markets opened with a gap-up of nearly 500 points. Before trading began Rajan, who cut repo interest rate by 25 basis points to 7.75% in a surprise move on yesterday, making its first reduction since May 2013, as inflation showed signs of slowing and the government was making efforts to contain the fiscal deficit.

Rate sensitive stocks like banking & financial services, real estate, capital goods and auto stocks led the surge. BSE Mid-cap index rose as much as 1.63% to 10,642.58 points and touched a record-high, while BSE Small-cap Index climbed as much as 1.3% to 11,343.80.

The U.S. stock indices finished a volatile session by extended their losing streak to a fifth straight session on Thursday after the Swiss National Bank stunned global markets by cutting its currency cap with the euro and disappointing earnings reports from two big banks.

The Dow Jones Industrial Average falling more than 100 points or 0.61%, at 17,320.71 after oil prices reversed and continued to slide. The Nasdaq Composite fell 68.50 points, or 1.48%, at 4,570.82 and the S&P 500 stock index lost 18.60 points, or 0.92%, at 1,992.67.

Oil prices declined Thursday, after initially rallying 5% in the previous session, after mixed data spurred global demand fears. WTI crude prices lost 3.53% Thursday to USD 46.77 per barrel and Brent crude prices lost 2.14% Thursday, to USD 47.65 per barrel. Spot gold was up about 2% at USD 1,263.11 an ounce after spiking as much as 3% to a four-month high after the Swiss move.

European equities rallied after a volatile session of trade on Thursday to close sharply higher, following action from the Swiss National Bank. France's CAC 40 climbed 2.4%, while Germany's DAX gained 2.2%. Britain's FTSE 100 rose 1.7%. The Euro Stoxx 50 advanced 2.2% to 3,157.36. However, Switzerland's main share index fell 8.7% in its biggest single-day percentage loss in 25 years, wiping about USD 100 billion of market value off Swiss companies. The rise in the value of the franc is expected to deal a blow to Swiss companies whose businesses include big exports to Europe.

Asian stock markets opened lower on the final trading of the week, tracking U.S. losses overnight following disappointing bank earnings and amid oil's continued price slump. The Topix index sank 1.93% to 1,350 and the Nikkei 225 Stock Average slid 2.3% to 16,716. The Kospi index in Seoul retreated 1.2% and the Hang Seng Index slid 0.75%. The Shanghai Composite Index rose 0.8% to 3,363 extending yesterday’s 3.5% jump. The gauge has advanced 2.6% this week amid optimism the central bank will cut reserve-requirement ratios after unexpectedly lowering borrowing costs in November to bolster the economy. The 10th week of gains is the longest winning streak since May 2007.

SGX Nifty is showing positive trends with gains of 0.52%. We are of the opinion that Indian equities are likely to open on a positive note despite negative global cues.