Market May Open Positive

The Indian market may show strong positive opening in line with the global cues today. The SGX Nifty is currently trading with gains of 28 points to 5710.

Overnight the US market edged higher as the Spain budget matched the market expectations. DJIA closed with gains of 0.54% to 13485.97. S&P 500 index also made handsome gains of 0.9% to close 1447 while NASDAQ soared by 1.3% to 3136.

Earlier yesterday the Spanish government put forth a budget which detailed the austerity plans of cutting the spending rather than increasing the taxes. The reaction from the European markets was strong to the budget as all the key European indices closed in positive. FTSE and DAX closed with 0.2% gains each while CAC closed 0.7% higher. The environment in the Europe however remains fragile as the world is more concerned of the financial situation in Europe. Besides, there were violent protests in Spain on the austerity measures indicating that people may not like to take the spending cuts positively. For now however the Spain budget meets the market expectations.

Earlier yesterday, the Supreme Court gave a breather to the government by saying that the court order for the natural resources auction was only limited to the telecom sector and not for the other resources. The court has also said that the public good is more important than revenue maximization. The telecom stocks may show some gains post this verdict.

Besides the government has also approved the Pharma policy pricing policy which will bring 348 drugs under the scanner than earlier 74 drugs. This policy can potentially harm the revenues of the Pharma companies and one can expect the volatility in the Pharma sector.

In Asia, the scenario is currently mixed with Japan showing negative trades while Shanghai trading flat and Hang Seng gaining 0.25%.

Yesterday the September series expired with 6% gains. With the start of new series we expect some volatility in the market in the initial period. This month has seen host of positive news which floated the indices positively. As we move ahead, we believe that most of the positive news may have been discounted and that October series may show flat to little positive trades.  The key event to watch will be the IIP, inflation and RBI stance. Few banks have actually went ahead and cut the lending rates hence there would further be speculation on the rate cut about which we remain skeptical.

The Rupee has also been showing fantastic strength after the government reforms. Yesterday Crisil said that the EBIDTA margins of India Inc may have bottomed out as the rupee is showing appreciation and the global commodity prices are also softening. The credit rating agency also said that from here one it expects the margins to show rise.

For today however the market may show positive trades as we see no major headwinds. We expect the Europe to open positive.