Markets to extend the gains on supportive global cues

The Indian markets tailing global cues made a recovery in second half of last session to close modestly in green. Though, the surge in inflation numbers dampened the mood of investors and lessened the hopes of rate cut by the RBI in its upcoming policy review on October 31. Today, the start is likely to be in green on supportive global cues and markets are likely to add weight to their late momentum of last session. There will be result impact of Reliance Industries, which despite posting a 6% fall has once again posted over $1 billion net profit in a single quarter. Inflation accelerated to a 10-month high in September on the back of higher diesel prices but Planning Commission Deputy Chairman Montek Singh Ahluwalia has said that the recovery process has begun and will lead to a higher growth rate of 6 per cent or higher in the second half of 2012-13. Sugar stocks are once again likely to surge, as the food minister KV Thomas has said that the government will continue free export sugar policy in the current 2012-13 sugar marketing year.

There will be lots of scrip specific movements as well as some important result announcements to keep the markets buzzing. GIC Housing, Mindtree, NIIT Tech, Kajaria Ceramics and Tata Metaliks are among many to announce their numbers today.

The US markets made a bounce back with the start of new week and major indices gained about a percent after retail sales for September exceeded expectations, though another report on manufacturing activity in New York state in October showed less improvement than anticipated but traders overlooked that with better than expected earnings by Citigroup. Most of the Asian markets have made a positive start supported by gains in exporters after the US retail sales data. There was some somberness in Chinese market on earnings concern.

Back home, key domestic benchmark, shrugging off higher inflation numbers, ended the session with slender gains on Monday. Buying which emerged in late trade, largely supported by firm European counterparts supported the domestic equity markets. The local gauges pulled back after breaching 18,600 (Sensex) as the inflation touched 2012 high by climbing to 7.81 percent from 7.55 percent in August as prices of potato, pulses, wheat and sugar soared. The impact of increase in diesel prices was also partly reflected in last month’s figures. High speed diesel inflation soared 8.94% after the government increased diesel prices by Rs 5 on September 13. The main support to the domestic bourses came from European markets, which traded firmly in the opening deals as investor confidence was lifted by hopes that after the European Union Council meeting on Oct 18-19 in Brussels, Spain will seek bailout funds and Greece will shortly receive the required rescue package needed to overcome the financial instability. Back home, rate cut hopes in RBI’s upcoming second quarterly policy review on October 30, provided cushion to the markets, after traders examined that core inflation for the month of September remain unchanged at 5.56 percent and statement from RBI Deputy Governor that current anti-inflationary policy stance could be ineffective if financial imbalances remain. Additionally, oil and gas too supported the frontline indices gaining over half a percent led by market bellwether Reliance Industries, which surged over half percent ahead of its Q2 earnings provided impetus to the hibernating bulls. In a quarter led by refining, the company is expected to post an over 20 percent growth in profits sequentially. Some amount of strength were provided by sugar stocks which extended Friday’s gains triggered by a panel headed by C Rangarajan submitting a report to Prime Minister Manmohan Singh, recommending to lift curbs in the sugar sector. FMGC stocks too supported the sentiments as scrips viz. HUL, Marico and Godrej Consumer edged higher on favourable outlook for Rabi or winter crop following wide-spread rains in August and September. Finally, the BSE Sensex gained 38.37 points or 0.21% to settle at 18,713.55 while the S&P CNX Nifty rose by 11.20 points or 0.20% to end at 5,687.25.