Markets likely to extend the rally on global optimism

The Indian markets managed a close of gain in last session despite a weak start and after trading in red for most part of the day. Though, the trade remained choppy but the indices extended their rally in the new month. Today, the further extension is expected in the last session’s rally as the global cues are good. There will be buzz in the auto stocks as the car sales in the country accelerated for the third straight month in January, indicating that sales in the next fiscal year could be robust. The telecom stocks too will be in action as the issues related to the 2G case, including Home Minister P. Chidambaram’s alleged role in the scam, are expected to be decided by the Supreme Court. The judges are also likely to deliver judgment on a plea by the Centre for Public Interest Litigation (CPIL) seeking the cancellation of 122 licences granted in 2008 to nine telecom companies. Further the PSU stocks too will be buzzing as an EGoM on disinvestment will be meeting today. Meanwhile, RBI Governor Duvvuri Subbarao has said that the amount of public debt a country can accumulate needs to be capped as a proportion of its gross domestic product for economic stability.

Apart from this there will be lots of important result announcements. Andhra Bank, Chennai Petro, Corporation Bank, Escorts, Gillette India, Hexaware Tech, Piramal Health, Marico, RCF, Procter & Gamble and Thermax are among the many to announce their numbers today.

The US markets surged on Wednesday on the back of strong manufacturing data and encouraging reports about the Greek debt crisis. Also, the Commerce Department said that construction spending rose 1.5 percent in December, the fifth straight monthly gain. The Asian markets have made a positive start tailing the US markets and with the good manufacturing data across the region. Meanwhile, the Tokyo Stock Exchange suffered its biggest disruption in almost six years; shares will resume trading at 12:30 p.m. local time.

Back home, boisterous Indian equity markets managed to elegantly overcome early blues and staged an exciting bounce back from the lowest levels in Wednesday’s session, taking the benchmark indices beyond crucial technical levels. The frontline indices surged over one and half a percentage points from intraday lows to settle around the psychological 17,300 (Sensex) and 5,250 (Nifty) levels. After commencing the session on a sluggish note and trading below the neutral line for most part of the day, the stock indices rebounded in the second half following the encouraging leads from European markets. The Chinese manufacturing sector led the optimism in the market today. Furthermore, the European manufacturing sectors improved beyond expectations in January, raising optimism in the market that the euro-area region is on the right track to avoid slipping back into another phase of recession despite the two-year debt crisis. Investors kept piling up positions in late trade amid hopes that Europe will beat the escalating debt crisis, especially after the encouraging European summit and the improvement seen in fundamentals in addition to the better bond market. Earlier on Dalal Street, the benchmark got off to a subdued start as investors remained cautious following mixed close on Wall Street after getting weaker than expected economic reports from the US. The equity indices kept moving in a tight range through the morning trades as investors chose to take some profits off the table after the recent sharp rally. After slipping to intraday lows in early afternoon trades the key gauges showed a swift trend reversal in tandem with European markets. The northbound journey only ended with the session’s close around the high point of the day. On the BSE sectoral front, the Metal counter remained the leading gainer with close to 3% gains. The Capital Goods and Auto pockets too went home with over strong gains of over 2%. The Consumer Durables pocket on the other hand languished at the bottom of the table with over 1% cuts. Finally, the BSE Sensex rose 107.03 points or 0.62% to settle at 17,300.58, while the S&P CNX Nifty up by 36.45 points or 0.70% to close at 5,235.70.

The US markets rallied on Wednesday, breaking a four-session losing streak for the Dow Jones Industrial Average and S&P 500, lifted by Chinese and European data and an expansion in US manufacturing. The Institute for Supply Management, showed business at US manufacturers expanded in January at the fastest pace in eight months. Separately, the Commerce Department reported builders increased spending for a fifth straight month in December, with construction expenditures up 1.5%. Ahead of the market opening, Automatic Data Processing Inc. released private-sector payrolls data showing US employers added 170,000 jobs last month. The data comes ahead of Friday’s monthly nonfarm payrolls report from the Labor Department. However, the Congressional Budget Office projected that the 2012 federal budget deficit will be about $1.1 trillion, and that the economy will continue its sluggish recovery, with unemployment remaining above 8% both this year and next. The projected deficit represents 7% of US GDP that is nearly 2 percentage points below the deficit recorded in 2011 but still higher than any annual deficit between 1947 and 2008. Investor optimism also came with talk that Greece is going to work out a deal as far as their debt is concerned. Besides, Germany and Portugal completed bond auctions at lower yields.

The Dow Jones Industrial Average closed higher by 83.55 points, or 0.66 percent, at 12,716.50. The S&P 500 was up by 11.68 points, or 0.89 percent, at 1,324.09, while the Nasdaq closed up 34.43 points, or 1.22 percent, at 2,848.27.

Crude oil prices declined close to a percent on Wednesday as investors chose to square off positions after US EIA data indicated that crude stockpiles increased more than expected as it shot up 4 million barrels last week. The fuel prices also were pressured by Euro-zone debt woes as investors remained cautious over the region’s economic growth. While, the downside was limited by ongoing tensions over Iran as US took efforts to further tighten its already harsh sanctions against the nation with nuclear ambitions while the upbeat Chinese manufacturing data supported sentiments early in the session.

Benchmark crude for March delivery declined $0.87 or 0.9% to $97.61 a barrel on the New York Mercantile Exchange. In London, March delivery Brent crude gained $0.58 or 0.5% to $111.56 a barrel.