Markets likely to get a green start; Sensex may touch 16k mark in early trade

04 Jan 2012 Evaluate

The Indian markets went for a huge relief rally in last session and the benchmark indices gained over two and half a percent, there was across the board buying in the markets supported by the positive economic reports from both domestic and global front. Today, the start is likely to be in green and the markets will extend their gains for the third day, though some profit booking in the late trade at higher levels too can be expected. The markets are likely to be buzzing with the Sebi board’s newly introduced concept of institutional placement programme (IPP) that will allow a promoter to either issue fresh equity or dilute its holding by up to 10% of the total equity. On the same time the telecom stocks are likely to be under pressure as the telecoms department plans to impose penalties totaling Rs 1,594 crore on five mobile phone companies for allegedly understating revenues and hence paying lower revenue share during 2006-07 and 2007-08. As per telecom departments estimate, the Reliance Communications will have to pay penalties to the tune of Rs 551 crore while for Bharti Airtel, it will be Rs 292 crore. The penalty for Vodafone works to Rs 254 crore. Idea Celluar will have to pay about Rs 113 crore, Tata Teleservices at Rs 273 core and Tata Communications at about Rs 120 crore.

From individual stocks, Reliance Industries (RIL) is likely to keep buzzing, as the government after months of delay has approved RILs' $1.53 billion investment plan for developing four satellite fields in the flagging KG-D6 block.

The US markets made dazzling start of the new year and the major stock indices surged over one and half a percent after an extended weekend. Fresh good news from the economy front boosted the morale of the investors. US manufacturing increased at the fastest pace in six months, also the Minutes from the latest meeting of the Federal Reserve’s Open Market Committee found the central bankers in a slightly more upbeat mood. There was good report from Europe too, unemployment rate in Germany, Europe’s biggest economy, fell more than expected in December. The Asian markets have extended their jubilation for the second consecutive day on report that US manufacturers ended 2011 with the strongest showing since late spring. Stock markets in Japan and China begin trading today for the first time in 2012 on a solid note.

Back home, a day after halting the four successive session downtrend, Indian frontline equity indices took a quantum leap on the second trading session of 2012 by vehemently rallying to re-conquer the psychological 4,750 (Nifty) and 15,900 (Sensex) levels. The block buster performance staged by the markets has not only propped up the benchmarks by close to three percentage points but also underpinned them to the highest levels in a week. There appeared not even an iota of profit booking in the session as enthusiastic investors largely focused on hefty bottom fishing in badly butchered but fundamentally strong equities. Across the board buying was evident in the session with the Capital Goods counter being one of the prominent gainers after sentiments got buoyed on getting an encouraging manufacturing activity data which showed that the sector resiliently bounced in the month of December as it accelerated at a swiftest pace in last six months. The upbeat domestic demand, new orders and increase in exports together helped in underpinning the HSBC PMI index to remain in the expansionary territory for 33 months in a row. The banking counter too garnered a lot of traction in the session amid hopes of monetary easing by the Reserve Bank while the decline in government bond yields for second day in a row also helped most banking names in spiking up to higher levels. Earlier on Dalal Street, the benchmark got off to a gap up opening in tandem with the optimistic sentiments prevailing in Asian markets post on the back of encouraging global manufacturing activity reports. The frontline indices gathered momentum and commenced the northbound journey with great conviction. There appeared absolutely no resistance what so ever throughout the session as the indices kept conquering one psychological level after another. Moreover, the broader markets too fervently rallied to settle with huge gains of around two and half a percent, underperforming their larger peers. On the BSE sectoral space, the Metal sector shone brightly and remained the top gainer in the space with over five percent gains followed by the Capital Goods and rate sensitive Bankex and Realty indices which ended with over four percent gains. Meanwhile, TV18 Broadcast was locked in upper circuit on reports that Reliance Industries will sell part of its stake in regional broadcaster ETV to TV18 Broadcast. Finally, the BSE Sensex jumped 421.44 points or 2.72% to settle at 15939.36, while the S&P CNX Nifty climbed by 128.55 points or 2.77% to close at 4,765.30.

The US markets surged on the start of a new trading year after a gauge of US manufacturing hit a six-month high, adding to cheer that began with solid data from overseas with unemployment falling to a two-decade low last year in Germany and indexes for China’s services and manufacturing industries rising in December. US factories expanded in December at the fastest pace in six months. The Institute for Supply Management reported that its manufacturing survey rose to 53.9 last month from 52.7 in November. The production and employment gauges each rose 3.3 points, and there was a 0.9 percentage point gain for the new orders index. Also, the Commerce Department reported that construction spending climbed 1.2% in November, the third increase in four months.

Besides, there was release of minutes from the Federal Reserve’s December meeting, in which the central bank stated that it would begin updating the public four times a year starting this month, on how long it intends to keep interest rates at current levels. The Federal Reserve has decided to shift its communication strategy to show the likely path of interest rates. The Fed is still working on a statement of longer-run policy goals, the minutes showed. This could include a move to a formal inflation target. Further, the Fed staff trimmed its growth outlook due to developments in Europe, the minutes showed.

The Dow Jones industrial average gained 179.82 points, or 1.47 percent, to 12,397.40. The Standard and Poor’s 500 closed higher by 19.46 points, or 1.55 percent, to 1,277.06, while the Nasdaq composite gained 43.57 points, or 1.67 percent, to 2,648.72.

Crude oil prices staged a sharp rally on first trading session of 2012 as investors’ piled up hefty positions after worries over the global economic downturn got alleviated to some extent on getting encouraging manufacturing activity reading from the US and China, the world’s top two consumers of crude oil. The oil prices also got support from the lingering concerns over supply disruptions from Iran as sanctions signed into law by US President on Dec 31 intend to discourage transactions with the Iranian central bank. The Euro-zone nations too considered a plan to extend sanctions on Iran while the weakness in US dollar against a basket of currencies also made the commodity more lucrative for overseas investors.

Benchmark crude for February delivery rocketed $4.13, or 4.2% to settle at $102.96 a barrel after trading as high as $103.37 on the New York Mercantile Exchange. In London, Brent crude for February zoomed $4.75, or 4.2%, at $112.13 a barrel on the ICE.

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Markets likely to get a green start; Sensex may touch 16k mark in early trade

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