Markets Gain Some Momentum

After opening on a flat positive note, the Indian markets gained some momentum in the afternoon trade on the back of a positive opening in the European markets. The RBI's key policy rate cut, however, kept the markets' subdued, as high inflation continues to worry investors. The Consumer Price Index for Mar 2012 came in higher at 9.47% as against 8.83% in Feb.

The peer Asian markets continued to trade on a mixed note, with Hang Seng up by 0.82%, while Nikkei and Shanghai are trading losses of 0.82% and 0.09% respectively. The Chinese markets are trading on a higher note on the back of falling home prices in China. The situation is providing some relief to the government, which was trying to save the housing market from a 'bubble' scenario.

The European markets opened in the green today ahead of the second round of the Spanish bond auction. The market is expecting the second round to get a similar kind of response that the first auction received. The bond auction will test the investors' appetite, as the debt auction comes a day after the country revealed that in Feb 2012, the banks' bad loans surged to their highest since Oct 1994.

The International Monetary Fund offered an optimistic view on global growth and raised its growth forecast from 3.3% to 3.5% on the back of improved activity in the US and receding worries over the European debt problems.

Among the rate sensitive sectors, the Auto stocks are continuing with their rally. Bajaj Auto, Hero MotoCorp, M&M, Maruti Suzuki and Tata Motors are trading with gains of 0.85%, 1.62%, 1.29%, 2.69% and 2.65% respectively. Other indices such as Pharma, IT, Metals, Bankex, etc. are also trading with gains between 0.43%-1.05%. The rate cut by the RBI will lead to higher liquidity in the system and will boost the investment cycle of the manufacturing sector.

Of the individual stocks, Gujarat Gas has risen by 1.37% to Rs 330.20 on the back of news that the company has executed a fully-termed gas sales and transportation contract with GAIL for to purchase of gas.

ACC, one of the largest cement manufacturers, declined by 1.09% to Rs 1283.25 on the back of its Q1 earnings numbers. The company has reported a decent growth in its topline, but reported lower-than-expected net profits due to a one-time depreciation adjustment.

After reporting strong Mar 2012 quarter numbers, HDFC Bank and HCL Tech are continuing to trade higher with gains of 2.70% and 1.50% respectively. Sun Pharma's stock has moved higher, trading up by 1.25% to Rs 604 after news of the company winning a litigation in the US over a patent.

The market breadth, which indicates the overall health of the market, is positive. On the BSE, 1452 shares, gained 1221 shares declined and 114 shares remained unchanged.

We expect the markets to remain flat but positive for the rest of the day on the back of the positive opening of the European markets.