Indian markets to make a good start in tandem with global rise

The Indian markets capitulated on Friday and the benchmarks deposed another over a percent on fears of slow global economic recovery, marketmen even overlooked the unexpectedly better IIP numbers. Today, the start is likely to be a good one and a gap-up opening can be expected after a long weekend, as the global markets seems to have stabilized. Marketmen will feel some comfort with President Pratibha Patil’s statement that the Indian economy has fundamental strength and resilience and its large domestic market can help it maintain steady growth. Today, all eyes will be on July WPI inflation number, though it is expected to moderate a bit but higher food prices may have balanced the impacts of RBI’s rate tightening measure.  The next course of action of the central bank will mainly depend on the numbers and all the rate sensitive will respond according to it. Meanwhile, industry body, ASSOCHAM has said that non-performing assets of banks are likely to go up as lending to certain sectors like telecom, airlines and agriculture might turn into bad loans. Gross non-performing assets of all scheduled commercial banks in India have declined to nearly two percent of advances as compared to 15 percent in late 1990s. In value terms, gross NPAs increased at a compound annual growth rate of less than one percent since 2000-01 compared to 23 percent growth in gross advances.

The US markets went for the third consecutive day of rally on Monday, traders were optimistic that European debt problem can soon be resolved; leaders of France and Germany are meeting on Tuesday to discuss Europe’s debt problems. There was some deal news that too supported the US markets, Google will buy phone hardware maker Motorola Mobility Holdings and Time Warner Cable Inc. was planning to buy Insight Communications Co. The Asian markets have made a good start and barring some somberness in the Chinese market, others are trading higher by over half a percent each.

Back home, Indian frontline equity indices went through a lot of commotion on the last trading session of the week and got battered by a percentage point, ignoring a largely optimistic trend that the Asian and European counterparts exhibited. Despite commencing the session on an optimistic note tracking the optimism in global markets on the back of better than upbeat corporate earnings and better than expected US employment data which showed that the number of people filing for unemployment benefits for the first time fell last week. However, gains for the domestic bourses were not as pronounced as in the US and the key indices drifted into the red territory despite the pleasantly surprising June IIP numbers which surged by 8.8% in June as compared to a nine-month low of 5.6% in May. The sharply higher reading failed in enthusing domestic investors as expectations were rife that the RBI will continue tightening policy in coming months until inflation peaks, despite increasing uncertainty over a global economic slowdown and an extended period of easy policy in the developed world. Earlier on Dalal Street, the benchmark got off to a smart opening on the back of encouraging leads from the overnight stock markets. But the optimism proved short lived as the investors started taking profits off the table ahead of the IIP numbers announcement. The upbeat IIP numbers failed to surprise marketmen as pessimistic leads from the European markets outweighed them. After hitting intraday lows and drifting around the psychological 16,800 and 5,050 levels in the early second half, the frontline indices chose to consolidate their position thereafter through the end of session. Eventually the NSE’s 50-share broadly followed index Nifty, plunged by over one and a quarter percent to settle above the crucial 5,050 support level while Bombay Stock Exchange’s Sensitive Index, Sensex shaved off over two hundred points and ended above the psychological 16,800 mark. The broader markets which traded with some conviction before the robust IIP numbers were released, too slipped into the red terrain but settled with moderate losses. In the BSE sectoral space, the IT and TECk pockets seem to have done the maximum damage as they shaved off around two and half a percent as the worries over global economic slowdown did not augur well for the Indian IT industry. Finally, the BSE Sensex shaved off 219.77 points or 1.29% to settle at 16,839.63, while the S&P CNX Nifty plunged by 65.35 points or 1.27% to close at 5,072.95.

The US market closed higher on Monday for a third session in a row, amassing gain of more than 7% making it the longest winning run since July, as investors embraced lots of deal making news, the major being Google Inc.’s $12.5 billion play for Motorola Mobility Holdings Inc Stocks overcame economic reports showcasing continued stress on the economy. Manufacturers in the New York region expressed more pessimism about what’s ahead, and confidence among US home builders stood unchanged at very low levels in August. The relative calmness reigned as markets in Europe were also calm ahead of the meeting between the leaders of France and Germany.

The investor’s sentiments got a push on Google Inc's biggest deal ever, acquiring Motorola Mobility Holdings, which is an attempt to buy insurance against increasingly aggressive legal attacks from rivals such as Apple Inc. Among other deals, Time Warner Cable Inc. will pay $3 billion for Insight Communications Co, while, Agribusiness conglomerate Cargill said it will buy animal nutrition company Provimi of the Netherlands for $2.16 billion.

The Dow Jones industrial average gain 213.88 points, or 1.90 percent, to 11,482.90. The Standard and Poor's 500 closed higher by 25.68 points, or 2.18 percent, to 1,204.49, while the Nasdaq composite was up by 147.22 points, or 1.88 percent, to 2,555.20.

The Indian ADRs closed mixed on Monday, HDFC Bank was up by 0.52%, ICICI Bank was up by 0.50% and Infosys Technologies was up by 0.42%.

Crude prices made a good rebound on Monday tracking equity, which rose on hopes that Europe’s debt crisis could be resolved the optimism was so high that oil investors ignored a New York Federal Reserve Bank report that the manufacturing sector in the state shrank for the third straight month in August. There were other news too that supported the crude prices, the dollar fell against the euro and the  Japan’s GDP declined much less than expected in the second quarter.

Benchmark crude for September delivery settled at $87.88 a barrel, rising $2.50, or 2.93 percent, after trading in a range from $84.40 to $88.05 on the New York Mercantile Exchange. In London, Brent crude for September delivery settled at $109.91, gaining $1.88, or 1.74 percent on the ICE.