Markets likely to get a solid start on positive global and local developments

The Indian markets after a range bound session managed to close modestly in green on Thursday, all eyes were on the US Central bank’s policy decision and the volume remained low. Today a gap-up start is on cards, tailing bullish global mood.  On the domestic front the overnight decision of hike in diesel prices is likely to keep the markets buzzing and the ailing PSU oil marketing companies are likely to gain after a cabinet committee increased diesel prices by Rs 5 per litre from Friday and also decided to limit the number of subsidised cooking gas cylinders per household to six per year. The decision might pinch the common people but it is likely to help avert a sovereign credit downgrade and has raised expectations of more reforms to reverse an investment slump in the country. The aviation sector is likely to continue its upmove as today the Union Cabinet is scheduled to discuss whether to allow foreign air carriers to invest in domestic airlines. The proposal to allow foreign airlines to acquire up to 49 per cent stake in Indian airlines has been stuck since long, lacking consensus among the government constituents. The PSU sector too will keep buzzing, as the government will consider the proposal of stake sale in five state-owned companies including Hindustan Copper, Oil India and Nalco. The Cabinet Committee on Economic Affairs (CCEA) will also consider initial public offering in the Rail India Technical and Economical Services (RITES).

The US markets surged on Thursday nearing to their highest finish since late 2007, after Federal Reserve announced its decision to launch further stimulus measures largely termed as QE3, to boost the economy. Fed not only announced an open-ended plan to purchase $40 billion worth of mortgage-backed securities per month but extended its pledge to keep interest rates at their zero levels until at least mid-2015. The Asian markets have rejoiced with the Fed decision and there is all green in the regional market with some of the indices trading higher by over two percent.

Back home, key domestic benchmarks managed to extend their current winning streak to seventh straight trading session, although both the frontline indices just about managed to hold in the positive territory. The BSE’s Sensex managed to sustain above 18,000 level for the second day in a row while, the NSE’s Nifty stayed above 5,400 level triggered by policy reform hopes. Sentiments also remained higher after state-owned oil marketing companies IOC, BPCL and BPCL edged higher on reports that Cabinet Committee on Political Affairs (CCPA) meeting later today for deciding on diesel, cooking gas and kerosene price hike. However, the bourses traded in the tight band throughout the day’s trade as investors turned cautious and booked profits ahead of the August headline inflation data due tomorrow and US Fed’s policy decision later today. The sentiments also got dampened after HSBC cut its GDP growth forecasts for FY13 and FY14 citing ‘the lack of reform traction’, a more ‘challenging’ global economic backdrop, and expectations of further delay in rate cuts by the Reserve Bank of India (RBI). HSBC expects India to grow 5.7% in FY13, down from its previous forecast of 6.2%. At the same time, buying in PSU space helped the gauges to trade above their neutral line as shares of select PSU companies edged higher amid media reports that the Union Cabinet on Friday will consider approving plans for selling some of the Government’s stake in five state-run companies. Some amount of support came in from Airline stocks, which gained after reports said that the CCEA would consider a plan to allow foreign airlines to pick up equity of up to 49% in Indian carriers. However, there is no certainty that the proposal to allow FDI in aviation sector will be approved by the CCEA on Sept 14. Meanwhile, Media shares like, TV18 Broadcast, NDTV and BAG Films and Media edged higher on renewed buying ahead of the October 31, 2012 deadline for cable TV digitization in four metro cities of Delhi, Mumbai, Kolkata and Chennai. The BSE Sensex gained 21.13 points or 0.12% to settle at 18,021.16, while the S&P CNX Nifty rose by 4.35 points or 0.08% to close at 5,435.35.