Markets likely to get a positive start on supportive global cues

The Indian markets made good gains in last session, bouncing back from the RBI’s policy disappointment. There was hopes that if the central bank has maintained a status quo, it will definitely go for a rate cut in the next policy review scheduled in January, as it sounded optimistic about the economic recovery. Planning Commission Deputy Chairman Montek Singh Ahluwalia too has pitched for lowering of interest rates to boost economic growth. Today, the start is likely to be in green with markets extending their gains on supportive global cues. There will be buzz in the banking sector, as well as the companies aspiring for their entry into the banking space, as Lok Sabha passed the Banking Regulation (amendment) Bill, a pre-requisite set by the RBI for granting new bank licences. The export oriented stocks too will be in cheerful mood after Commerce Minister Anand Sharma expressing his concern about India’s exports contraction and trade account deficit said that the government is firmly committed to the reforms agenda.

The US markets extended their gains on Tuesday on hopes that a deal would be struck to avoid painful spending cuts and tax hikes that could hurt the economy. There were signs of progress in budget negotiations between President Barack Obama and House Speaker John Boehner. Most of the Asian markets have made a positive start, Japanese Nikkei has once again taken the lead despite the report that Japan’s export fell for the sixth month in November.

Back home, despite anti-inflationary stance from Reserve Bank of India, Indian equity markets snapped the session near their intraday high levels. Frontline gauges made a positive opening but all enthusiasm was overtaken and the benchmarks entered into red after the apex bank kept the bank lending rate unchanged at 9 per cent, the repurchase (repo) rate at 8 per cent, reverse repo rate at 7 percent, the cash reserve ratio at 4.25 per cent and statutory liquidity ratio at 23 per cent. The frontline indices extended their losses to touch intraday lows after finance ministry cut its forecast for India’s growth to about 5.7 per cent to 5.9 per cent in the year through March from an earlier estimate of as much as 7.85 per cent. However, the markets soon recovered to trade higher thereafter as recovery witnessed in banking stocks after RBI indicated a cut in the repo rate in the January-March quarter. Further, the gains in banking stocks were fuelled by expectations that the banking amendment bill will be passed in parliament after the government dropped a controversial clause that would have allowed banks to trade in commodity futures.  Domestic markets extended their gains in second half to end near day’s high supported by positive opening in European counters which climbed for the first time in four days amid optimism that American lawmakers will agree on a budget to avoid fiscal cliff. Back home, the northward journey was also supported by hefty buying in realty counters which rallied over percent as sentiment turned bullish on the expectations of rate cut by the Reserve Bank of India at its policy meet next month. Some support also came in after metal stocks rose for the third straight day after data on December 14, 2012 showed that a preliminary version of HSBC’s China manufacturing Purchasing Managers’ Index hit a 14-month high in December 2012. Moreover, software and technology pack rose by 0.50 and 1 per cent respectively after Indian rupee breached the 55 level against the dollar after the Reserve Bank of India left the key policy rates and the cash reserve ratio unchanged in its mid-quarter monetary policy review. Finally, the BSE Sensex gained 120.33 points or 0.63% to settle at 19,364.75, while the S&P CNX Nifty rose by 38.90 points or 0.66% to end at 5,896.80.