New series to get a flat start; markets to consolidate after a day of break

The Indian markets ended the January series on a solid note with major indices gaining over 10 percent for the series, despite some choppiness markets snapped the day with gains of around half a percent. Today, the start is likely to be flat-to-positive and the new series to begin on a positive note. The jubilation at the rate sensitives are likely to continue as the RBI deputy governor Subir Gokarn has said that headline inflation does not need to get to a particular number for the Reserve Bank of India to act on interest rates. Governor Subbarao said tha said core inflation of 4.00 percent to 4.50 percent was in the realm of possibility and that the central bank would like the number to reach that level eventually. Meanwhile, there will be some buzz in auto sector as the finance ministry is considering the imposition of higher excise duty on diesel vehicles in the upcoming Budget. In order to discourage consumption of subsidised diesel by personal vehicle owners, the petroleum ministry had suggested the imposition of higher duty on the purchase of diesel cars to the finance ministry. Though, markets are likely to get some strength with Asian Development Bank stating that Asian region will remain the economic powerhouse of the world, led by China, India and Indonesia.

There will be lots of result announcements to keep the markets buzzing. Bank of India, BHEL, Blue Star, Canara Bank, NHPC, NTPC, Petronet LNG, Pfizer, Swaraj Engines and Wyeth are among the many to announce their numbers today.

The US markets closed lower on Thursday, though the new orders for US manufactured goods rose more than expected in December on strong demand for aircraft, but the rise in new claims for unemployment benefits in the latest week dampened the mood of the investors. The Federal Reserve acknowledged the improvement in the labor market, but noted the jobless rate remained too high. Most of the Asian markets have made a positive start; the Nikkei 225 is trading higher after the Japanese Prime Minister Yoshihiko Noda hinted that Bank of Japan may take some action to address the yen’s gain.

Back home, The January series futures and options contract expiry day turned out to be steady session for the Indian benchmark indices as the session lacked the flavor of high volatility which typically surfaces on F&O contract expiry day. Nevertheless, the frontline indices managed to extend the gaining momentum after the previous session’s over one and half a percent rally on the back of RBI’s pleasantly surprising CRR cut. The psychological 5,150 (Nifty) and 17,050 (Sensex) levels proved as strong supports as the frontline gauges got a technical bounce from those levels and headed towards the 5,200 (Nifty) and 17,150 (Sensex) resistances. Sentiments were positive a day ahead of India’s Republic day holiday as investors covered hefty short positions not only in heavyweight stocks but largely across the board a day after the RBI decision led infusion of Rs 32,000 core into the Indian banking system. However some profit booking was evident in rate sensitive Realty and Banking along with Capital Goods counters as majors like ICICI Bank and L&T shed some part of the gains they amassed on Tuesday. The NSE’s 50-share broadly followed index Nifty, climbed around half a percent and settled just above the psychological  5,150 support level while Bombay Stock Exchange’s Sensitive Index - Sensex rose over fifty points to close above the psychological 17,150 mark. The broader markets showed resilience held on to the over 1% gains and outclassed their larger peers by a fat margin. On the BSE sectoral front, hefty across the board buying was evident with the Metal counter leading the space with 1.79% gains. The PSU, technology and Automobiles counters too went home with over 1% gains each. On the F&O front, January series Nifty and Sensex staged a spectacular performance by skyrocketing over 10% each, the highest since March 2011. While the broader markets managed to outperform their larger peers by a fat margin as by the end of January series the mid cap and small cap rallied around 15%. Capital Goods, Bank Nifty and Metal sectors remained top sectoral performers during the series with handsome gains of about 27%, 23% and 20% respectively while IT index was the only laggard with 2% losses on NSE. Finally, the BSE Sensex rose 81.41 points or 0.48% to settle at 17,077.18, while the S&P CNX Nifty up by 30.95 points or 0.60% to close at 5,158.30. Indian markets remained closed on Thursday on account of national holiday.

The US markets closed lower on Thursday, after new home sales fell unexpectedly in December and dropped 6.2% to a record low in 2011. The Commerce Department stated that US sales of new homes fell 2.2% in December to a seasonally adjusted annual rate of 307,000. For all of 2011, sales of new homes fell 6.2% to 302,000 -- the worst on record. Also, weekly jobless claims rose after dropping to a four-year low. First-time claims for US unemployment benefits increased in the week ended January 21st. The claims had declined to nearly a four-year low in the previous week. Also bolstering sentiment, data from the Commerce Department had orders for US durable goods rising 3% in December. The durable goods orders increased and core orders excluding volatile transport and defense orders gained 2.9% indicating a tentative strength in business spending. Separately, the Conference Board stated that its leading economic index for the US increased 0.4% in December following a revised 0.2% rise in November.

In Europe, Italy raised €5 billion from an auction of short-term debt as borrowing costs fell. However, European leaders struggle to decide the size of the rescue fund and the impasse between Greece and its private lenders continues with no solution so far regarding the debt swap ratio.

The Dow Jones Industrial Average closed lower by 22.33 points, or 0.18 percent, at 12,734.60. The S&P 500 was down by 7.63 points, or 0.58 percent, at 1,318.43, while the Nasdaq closed down 13.03 points, or 0.46 percent, at 2,805.28.

Crude oil prices advanced for the second straight session on Thursday as sentiments got supported with positive US new orders for manufactured durable goods numbers in December. The US Fed's decision to keep key rates unchanged until late 2014 pressured the dollar making the dollar denominated fuel cheaper for holders of other currencies. However, the upside in crude prices was limited after the International Energy Agency downplayed chances of any disruption in oil supplies and was even open to tap emergency stockpiles in case Iran blocks oil exports to Euro-zone nations.

Benchmark crude for March delivery rose $0.30 or 0.3% to $99.70 a barrel after trading as high as $101.39 as low as $99.23 a barrel on the New York Mercantile Exchange. In London, March Brent crude climbed $0.98 or 0.9% to $110.79 a barrel on the ICE.