Markets likely to extend the rally mood with a positive start

The Indian equity markets surged again in last session with Sensex crossing 19000 mark and S&P CNX Nifty breaching 5800 level intraday. Trade remained jubilant as marketmen expected another round of reform measures from the government. Today, the start is likely to be in green with markets extending their rally mood in early trade on supportive global cues. Insurance related stocks will keep buzzing, as the Cabinet cleared all amendments in the insurance bill, allowing 49 per cent Foreign Direct Investment (FDI) in insurance. Meanwhile the Cabinet has also approved the draft 12th Five-Year Plan (2012-2013 to 2016-2017) document, which aims at an average annual GDP growth of 8.2 per cent that too may boost the sentiments of investors. However, the rate sensitive’s are likely to remain under pressure, as the RBI governor D. Subbarao has reiterated that inflation was not at a comfort level and at its forthcoming policy meeting on October 30, a few more measures are expected to be announced to rein in inflation. Though, he said that opening of foreign direct investment (FDI) in the retail sector would bring down inflation. Metal stocks will keep buzzing as four members of the six-member team of the Justice MB Shah Commission has went to Odisha to probe into the mega mining scam in the state.

The US markets extended their gains on Thursday on getting report that people filing new claims for unemployment benefits rose only slightly last week after a big drop the week before, the data soothed the sentiments ahead of Friday's closely watched monthly payrolls report. Most of the Asian markets have made a positive start taking cues from the US data. Japanese shares gained the most before the Bank of Japan concludes a policy meeting.

Back home, stock markets in India, coming out of their consolidation phase, showcased high degree of buoyancy on Thursday as the benchmark equity indices finished the session on a sanguine note on expectations of ‘second wave of reforms.’ The frontline indices exhibited a strong performance by vehemently garnering about a percentage point with Sensex crossing psychological 19,000 and Nifty ending past 5,750 levels, after momentarily breaching the crucial 5,800 mark, for the first time in almost 15 months ahead of a cabinet meeting in which big ticket economic reforms are expected to be taken up. The key gauges rallied on hopes that the cabinet may approve bills that would raise the cap on foreign direct investment in insurance firms and open the pension sector to foreign investors. The Cabinet will also consider the Forward Contract Regulation Act (Amendment) Bill to empower commodity markets regulator FMC with greater financial autonomy. It will also take up the Companies Bill to bring all sectors under the Companies Act, amendment to the Competition Act and a proposal for operationalizing the Infrastructure Development Fund (IDF). Furthermore, a proposal to set up a National Investment Board (NIB), to be headed by Prime Minister Manmohan Singh, for according fast-track clearances to infrastructure projects will also be taken up at the meeting. Appreciation in Indian rupee too boosted the sentiments. Indian rupee remained below 52 against the US dollar, strengthening by 30 paise to 51.85 against the US dollar, which indicates that the foreign institutional investors continued buying into Indian equities. But, the same remained dampener for the IT stocks as appreciation in rupee will impact software companies’ profit margins. Stocks of Infosys, TCS, Mphasis, Tech Mahindra and Oracle Financial Services tumbled during the trade. Despite this, the bourses continued its jubilant run till the end supported by better than expected service sector activity in India, which expanded at the fastest pace in seven months in September, driven by firm demand and ‘resilience’ of the sector. According to the seasonally adjusted HSBC Business Activity Index, the service sector activity soared to 55.00 in September, as against 54.3 in the previous month. Cues from the global front too remained supportive as European counters advanced in early deals on Thursday. Finally, the BSE Sensex surged 188.46 points or 1.00% to settle at 19058.15, while the S&P CNX Nifty soared by 56.35 points or 0.98% to close at 5,787.60.