Markets on way to snap a good january series with a positive start

The Indian markets surged in last session after the unexpected cut of CRR by RBI, the rate sensitives moved higher as the decision was seen the precursor to interest rate cuts later this year.However, RBI governor made it clear that lower rates will depend on the government taking credible steps to rein in fiscal deficit. Today, being the expiry day of January series F&O the trade is likely to be volatile, though the start is likely to be in green and the series is going to be one of the best performing ones in last couple of months with the series ending on a high note. Telecom companies will show some action as the telecom minister Kapil Sibal after meeting chiefs of leading operators has assured of taking a final call on telecom commission's suggestions soon.Meanwhile, the government has decided to do away with the practice of releasing the weekly food inflation data as they were not not portraying the “holistic” picture of the price situation. The government henceforth will only release the monthly headline inflation figures.

There will lots of result announcements to keep the markets buzzing, Alstom Projects, BEML, BOB, Indian Hotels, IRB Infra, Oracle Financials, Patni Computer, Sterlite Technology, Tata Communication, Union Bank and Vijaya Bank are among the many to announce their numbers today.

The US markets remained under pressure of the European debt crisis and once again ended mixed, there were earnings announcements that too weighed on the markets however some good results from technology companies like Apple helped the Nasdaq close in green. The Asian markets have made a green start with few more indices out for trading after a long weekend. Nikkei was trading higher as the yen weakened after Japan posted its first annual trade deficit in 31 years.

Back home, Indian equity markets gave a big thumbs-up to the Indian central banks’ unexpected decision to cut the cash reserve ratio to 5.5% from 6% which underscores a cut of 50 basis points. Sentiments got filliped as the Reserve Bank of India, even while maintaining its anti-inflationary stance attempted to ease the tight liquidity pressure on the economy by cutting the CRR and infusing Rs 32,000 crore into the Indian banking system. Marketmen even went ahead to overlook the RBI’s economic growth forecast for the current fiscal which it lowered to 7% from 7.6% earlier in addition credit growth estimates too were lowered to 16% from 18% while the central bank kept inflation forecast unchanged. Nevertheless, sentiments remained extremely bullish as investors piled up hefty positions not only in heavyweight stocks but largely across the board amid hopes that the RBI will not only focus on containing inflation but also on easing liquidity pressure to spur economic growth which has been adversely impacted due the RBI’s aggressive monetary tightening measures since March 2010. The frontline indices capitalized on the momentum and remained in euphoric mood for most part of the session and even sailed beyond various crucial levels. Earlier on Dalal Street, the benchmark got off to a cautiously positive start tracking the supportive moves in Japanese and Indonesian markets. The indices kept hovering above the previous closing levels in a narrow range waiting for the announcement of RBI’s all important policy announcements. Thereafter, the RBI’s CRR cut triggered sharp rally in local equities thanks to across the board buying but some profit booking in the dying moments took some sheen off the rally. On the BSE sectoral space, the Capital Goods counter garnered a lot of traction to settle as the top gainer with over three percent gains, thanks to the close to six percent rally in heavyweight L&T which announced strong third quarter earnings on Monday. The banking index too surged with similar gains post the RBI’s policy action while, encouraging earnings announcement by Yes Bank too supported to sentiments. While there were no laggards in the space, however some individual stocks like Coal India and Sun Pharma plunged over a percent. Finally, the BSE Sensex surged 244.04 points or 1.46% to settle at 16,995.77, while the S&P CNX Nifty soared by 81.10 points or 1.61% to close at 5,127.35.

The US markets ended mixed on Tuesday  and S&P finally lost its five days winning streak. There were few earnings disappointment, while the European debt crisis once again came on a forefront after Greece's debt crisis hit a snag and weighed on the markets. The country was close to a default as the private creditors pleaded with European officials who rejected their bond swap offer to hammer together a deal. A deal is a key condition for Greece to receive additional bailout funds from the European Union and International Monetary Fund. On domestic front, Verizon Communications Inc, McDonald's Corp and Travelers Cos Inc were the biggest drags on the Dow after posting weak quarterly results.

Meanwhile, the Federal Open Market Committee began a two-day meeting on Tuesday, at the end of which policymakers will start a new practice of announcing their interest rate projections. The Fed is hopeful that the projections, to be released on Wednesday, will give markets and the public greater clarity about its decision-making.

The Dow Jones industrial average lost 33.07 points, or 0.3% to 12,675.75, the S&P 500 shed 1.35 points, or 0.10% to 1,314.65, while the tech-heavy Nasdaq managed to gain by 2.47 points, or 0.09% to 2,786.64.

Crude oil prices declined over half a percent on Tuesday as sentiments got weighed down as there emerged little headway in resolution of Greece's debt problems. While the worries over EU slapping an embargo on Iranian crude oil export too went largely unnoticed as the ban would not take its full effect until July 1 which will offer Iran the opportunity to negotiate over its nuclear program and EU nations time to hunt for alternate source of crude. Fuel prices also got pressured by the appreciation in US dollar against a basket of currencies, making the dollar denominated crude expensive for overseas investors.

Benchmark crude for March delivery surged $0.63 or 0.6% to $98.95 a barrel after trading as high as $100.18 and as low as $98.25 a barrel on the New York Mercantile Exchange. In London, March Brent crude eased $0.38 or 0.3% to $110.20 a barrel on the ICE.