Consolidation on cards for the domestic markets after a big rally

The Indian markets went for a strong rally in last session; with across the board buying the benchmark indices touched their crucial psychological levels before snapping the session with around two percent of gains. Today, the start is likely to be flat-to-cautious and some consolidation may appear with metal and realty counters witnessing some profit booking at the higher levels. IT sector stocks are likely to remain in jubilant mood as the sector bellwether TCS has reported better than expected numbers as its profit for the December quarter rose by 22 percent q-o-q and 18 percent y-o-y. There will be buzz in power sector too as, the top brass of India’s power companies will meet the prime minister and top minister and will talk about the government facilitating easier supply of fuel, coal, natural gas because several power plants.  On the same time jubilation is likely to return to the airlines sector as the aviation ministry has said it will soon start the process of allowing foreign airlines to pick up upto 49 per cent stake in Indian carriers. Aviation Ministry said it would recommend that the government allow foreign airlines to buy stakes of up to 49 percent in Indian carriers. India currently bars foreign airlines from buying into Indian airlines, although foreign investors are allowed to hold a cumulative 49 percent.

Apart from this, there will be lots of result announcements to keep the markets buzzing. Bajaj Finserv, Jindal Steel, NIIT Technology, Raymond, Tata Coffee will the prominent ones to report their numbers.

Meanwhile, warning that the months ahead are difficult, finance minister Pranab Mukherjee has said that the growth rate could fall below 7% in the current financial year from 8.5% a year ago. In a similar development, an United Nations report released on Tuesday said that Indian economy is likely to grow at eight per cent per annum between calendar years 2011 and 2013 and projected India’s growth at 7.6 per cent in 2011.

The US markets rallied on Tuesday after a long weekend and all the major indices surged by around half a percent. Improvement in Europe’s debt problem and better than expected economic growth numbers from China helped the markets move higher. Greece and Spain were able to auction their short term debt at a lower rate than they have been paying earlier. The Asian markets have made a mixed start; Chinese markets were in somber mood after surging in last session as the energy and banking stocks declined on speculation that government will support equities.

Back home, Boisterous benchmarks showcased an enthusiastic performance on Tuesday by rallying close to two percentage points and breaking a lot of psychological levels in their northbound journey. There appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength as investors continued hunt of fundamentally strong but oversold bargains. Frontline indices tested the psychological  5,000 (Nifty) and 16,500 (Sensex) levels in the session and met with stern resistance around those levels but managed to finish the session around highest levels in six weeks and settled above 4,950 (Nifty) and 16,450 (Sensex) levels as investors took to hefty across the board buying. Sentiments got bolstered amid indications of improving overall domestic macro-economic scenario and hopes that the government will employ a slew of investor friendly measures in the forthcoming budget in March, as the government looks to revive the economy without raising fiscal deficit. Leads from the Asian peers too remained heartening as markets in China rallied over four percent on hopes of monetary easing after the world’s second largest economy registered stronger than expected growth in the quarter ended Dec. 31. Earlier on Dalal Street, the benchmark got off to a positive opening, tracking the sanguinity prevailing in Asian markets following successful French debt auction which alleviated concerns over the S&P’s downgrade of European nations. The frontline indices steadily gathered momentum thereon and commenced the northbound journey with great conviction. There appeared absolutely no signs of position squaring through the session as the indices kept conquering one psychological level after another. On the BSE sectoral space, there appeared absolutely no evidence of selling as all the indices traded with notable gains. The Capital Goods counter one again remained the top gainer with about four percent gains followed by the Metal pocket which surged over three and half a percent. Finally, the BSE Sensex jumped 276.69 points or 1.71% to settle at 16,466.05, while the S&P CNX Nifty climbed by 93.40 points or 1.92% to close at 4,967.30.

Crude oil prices jumped around two percent from Friday's settlement, as a slew of encouraging economic reports from China, Germany and the US boosted sentiments and alleviated concerns over the S&P’s downgrade of European nations' debt rating. The oil prices also got buttressed from depreciation in American greenback against a basket of currencies and made dollar denominated commodities cheaper for overseas investors.

Meanwhile, investors focus now seems to be shifting from potential supply disruptions concerns from Iran and Nigeria to Iraq which is planning to boost crude oil exports over the next two months.

Benchmark crude for February delivery surged $2.01 or 2% to $100.71 a barrel, after trading as high as $112.76 and as low as $110.56 a barrel on the New York Mercantile Exchange. In London, February Brent crude added $0.19 to end at $111.53 a barrel on the ICE.

The US markets closed higher on Tuesday, as investors welcomed several signs of improving global economic growth. The major indices edged higher after China reported faster than expected economic expansion, German confidence rebounded and New York manufacturing activity improved in January. However, the gains got trimmed as investors turned cautious on financial-sector earnings ahead in the wake of mixed results from Citigroup Inc. and Wells Fargo & Company. Citigroup reported a fourth-quarter profit decline while Wells Fargo reported a fourth-quarter rise in income. New York manufacturing activity improved in January, according to a report released by the Federal Reserve Bank of New York. The New York Fed stated its general business conditions index climbed to 13.5 in January from a revised 8.2 in December.

Also, Government figures from China illustrated the slowdown in that nation’s economic growth in the fourth quarter of 2011 to have been less than thought, with Beijing pegging China’s growth rate stood at 8.9%.

In Europe, despite Standard & Poor followed up on its recent downgrade of nine European countries by cutting the credit rating of the European Financial Stability Facility, still Spanish and Greek borrowing costs declined at auctions, curbing worry about how both nations would finance their deficits. Yet Greece could default as government talks with creditors stalled ahead of a March 20 bond payment of 14.5 billion euros, or $18 billion.

The Dow Jones Industrial Average closed higher by 60.01 points, or 0.48 percent, at 12,482.10. The S&P 500 was up by 4.58 points, or 0.36 percent, at 1,293.67, while the Nasdaq closed up 17.41 points, or 0.64 percent, at 2,728.08.

Indian ADRs closed in green on Tuesday, Tata Motors was up 0.88%, Infosys Technologies was up 0.84%, HDFC Bank was up 0.66%, Sterlite Industries was up 0.66% and Wipro was up 0.31%.