Markets to extend the upmove in new week with a good start

On Friday, Indian markets celebrated the QE3 announcement by US Fed and government initiative to turn its attention towards reform. Benchmark indices gained around two and half a percent with buying seen in all the sectors. Today, the markets are likely to continue their upmove with a good start of the holiday shortened week, government's decision to allow foreign investments in the retail and aviation sectors are likely to keep the markets going. The Aviation stocks will keep flying high, while the retail stocks that have long been waiting for the decision on FDI, too will rejoice. However, today all eyes will be on Reserve Bank of India which will be releasing its Mid-Quarter Review of Monetary Policy 2012-13 later in the day. The apex bank may surprise the street on its part after a series of big reform announcement by the government with some easing in policy rates, even though inflation remains stubbornly high. Though, one of its governor has said that inflation is likely to rise further due to recent hike in diesel prices, which will have cascading effects on the economy. The mining stocks too will remain buzzing as the Inter Ministerial Group (IMG) on coal blocks is meeting today and is likely to decide the fate of six more mines allocated to private firms that were issued notices for delaying production.

The US markets continued its surge on Friday following Fed’s announcement of buying more mortgage securities, rise in retail spending too supported the markets to move higher. Most of the Asian markets have made a positive start due to gain in the mining stocks across the region, though the Chinese market was trading lower on concern of slowing economic growth that may deepen next year as export demand slumps. Hong Kong markets have moved higher, while the Japanese market is closed today.

Indian equity markets gave a big thumbs-up to the government’s first major action to reduce fiscal deficit by raising diesel price and limiting the number of subsidised cooking gas cylinders per household to six per year. Moreover, announcement of economic stimulus by the Federal Reserve too boosted the sentiments. The frontline indices rallied for eighth consecutive session conquering their crucial 18,450 (Sensex) and 5,550 (Nifty) bastions, up by almost 2.5 percent each to their highest close since July 2011. Sentiments got filliped after the government raised diesel prices by Rs 5 per litre (excluding VAT). Diesel will now cost approximately Rs 47/litre in Delhi. The price revision comes after more than a year. Market-men even went ahead to overlook the higher August month’s WPI data. India’s main inflation gauge shockingly rose at 7.55% for the month of August, as compared to 6.87% (Provisional) for the previous month and 9.78% during the corresponding month of the previous year. The index for primary articles group, which has a weightage of 20.12% in overall WPI and includes food, non-food and minerals groups rose 0.3% to 219.5 from 218.8 for the previous month.  Nevertheless, sentiments remained extremely bullish as investors piled up hefty positions not only in heavyweight stocks but largely across the board amid hopes that the Reserve Bank of India may ease its monetary policy stance in the coming policy review meet on Sept 17. The frontline indices capitalized on the momentum and remained in euphoric mood for whole trading session without any interruption and even sailed beyond various crucial levels as government’s decision to hike diesel prices raised hopes that reforms might be coming back on track. Some amount of strength also came in from aviation sector as stocks of Jet Airways India, Spicejet and Kingfisher Airlines surged on hopes that the government will finally allow foreign direct investment in the sector at the Cabinet Committee on Economic Affairs (CCEA) meet later in the day. The rate sensitive like realty and banking space too aided the sentiments on hopes that a hike in diesel prices will provide room for Reserve Bank of India to ease monetary policy to give thrust on growth. The BSE Sensex rallied 443.11 points or 2.46% to settle at 18,464.27, while the S&P CNX Nifty climbed by 142.30 points or 2.62% to close at 5,577.65.