Markets likely to extend the upmove on supportive global cues

The Indian markets added gain of about half a percent in last session, though the trade remained choppy but traders went for value buying in blue-chips that led the markets higher. Today, the start is likely to be in green however traders will be eyeing the IIP data to be announced later in the day. After contracting 0.1 per cent in the April-June quarter and coming at (-)1.8 per cent in June, July numbers hold importance as they would give an indication of where is the economy headed in the second quarter. However, there is pessimism in the market related to the numbers, as the industrial output is likely to have increased only to 0.5 per cent in July 2012 due to the poor performance of infrastructure sector and export. Meanwhile, there will be disappointment in the PSU oil marketing companies as the fuel price hike decision has got longer after the CCPA meeting was deferred yesterday and has been rescheduled for September 18. However, there will be some cheer in India Inc, as the Reserve Bank of India relaxed guidelines for Indian companies to raise money overseas through external commercial borrowings (ECB). The maximum limit of ECB has been raised to 75% of the average foreign exchange earnings in the past three fiscal years, or 50% of the highest export earnings in any of the three years, or whichever is higher. Also, there is meeting of the inter-ministerial group mandated to review coal allocations in the wake of Coalgate that may keep the mining companies buzzing.

The US markets made a positive close on Tuesday with Dow snapping the session at its highest level in nearly five years ahead of Federal Reserve policy meet. Also, there was hope that Germany's Constitutional Court will approve the European Stability Mechanism on Wednesday. The Asian markets have made an all green start with some of the indices extending their longest weekly gains on speculation that China and US, the world’s two biggest economies will take more measures to spur economic growth.

Back home, Indian equity indices, after remaining under pressure in the first half, staged a spirited comeback in late trade snapping the session near intraday high buoyed by hopes of fuel price hike. Much of the hard work done in the second half of the session led the outperformance of Indian equity markets against global peers. The gauges took a U-turn in late trade supported by three public sector oil marketing companies BPCL, HPCL and IOC, which edged higher by 1-3 percent after Oil Minister Jaipal Reddy stated that fuel price hike is unavoidable in the short term. Moreover, the buying which emerged in select blue chip stocks also contributed to the up-move in late trade. The market sentiment also got some strength after Pharma stocks like, Cadila, Dr Reddys Laboratories and Cipla edged higher on report that Health Ministry is working on new rules to ensure the availability of medicines at affordable prices in the local market and may put tougher conditions for foreign pharmaceutical companies looking to acquire Indian drugs businesses. Meanwhile, marketmen awaited the release of industrial production (IIP) data for July, amid speculations that IIP might edge up 0.3 percent year on year in July, after shrinking 1.8 percent in June, which was the third contraction in four months. Traders were also awaiting August headline inflation figure slated to be released on September 14. Inflation remains above the comfort level of the government, as well as the Reserve Bank. The new data will provide key inputs for a decision on interest rates ahead of RBI’s monetary policy review on September 17, 2012.  The strength in the Indian markets during final hour were mainly induced by US stock index futures, which pointed a slightly higher open on Wall Street on Tuesday. Metal stocks remained the biggest underperformers as the Goa mining ban adversely affected companies like Sesa Goa, which is country’s biggest iron ore producer in the private sector. However, aviation stocks like Kingfisher, Jet Air India and Spicejet all edged higher after Minister for Civil Aviation Ajit Singh urged Oil Ministry on declaring aviation turbine fuel (ATF) as a notified product, which may decrease the burden of fuel cost on airlines. The BSE Sensex gained 86.17 points or 0.49% to settle at 17,852.95, while the S&P CNX Nifty rose by 26.55 points or 0.50% to close at 5,390.00.