Markets to extend the consolidation mood with a cautious start

The Indian markets went into a consolidation mood in the last session, still managing to hold their crucial levels and posting quarter percent of gains. Today, the start is likely to remain cautious  as the global cues are weak and there is no major cue on the domestic front. Traders will be concerned about the next policy review of the Reserve Bank of India as the governor D Subbarao has called for greater independence for central banks and stated that central banks cannot fix the problems of the economy on their own. There are wide expectation and pressure from industry along with the government to bring down interest rates in its January 29 monetary policy. There will be buzz in the coal sector, as the Planning commission deputy chairman Montek Singh Ahluwalia has made a strong pitch for privatization of the coal sector to meet the growing coal demand from the industry. Power sector too will be in action as the government has extended the ambitious debt-restructuring scheme for power distribution utilities till March-end  as none of the state governments so far has given sovereign guarantees for bonds to be issued to lenders in lieu of loans.There will be some stock specific actions to keep the markets buzzing, CCI has modified clauses in agreements between real estate firm DLF and apartment buyers in two of the company's projects in Gurgaon.

The US markets retreated on Thursday after a huge rally in the last session as minutes of Fed meetings revealed disagreement on how long the central bank should buy bonds. On the economic front too there was not much good news, jobless claims rose by 10,000 to a seasonally adjusted 372,000 and retailers posted mixed monthly same-store sales results. Most of the Asian markets have made a soft start tailing US cues, though Chinese and Japanese markets , which missed the rally of last two sessions due to holiday are showing good upmove.

Back home, Extending their gains for third straight day, Indian equity benchmarks snapped the trade at their two-year closing highs on Thursday in a range-bound session. Though, the gains remained marginal as investors, throughout the trade, opted for profit booking at higher levels. Nevertheless, the markets managed to keep their head above water led by oil & gas sector which remained the top gainer, as the Rangarajan panel proposed a new gas pricing formula and if the recommendations of the Panel find their way then the domestically produced gas price in the country would hover around $7-8/mmBtu at the current rate. Investors’ confidence also got some boost from the statement of PM’s Economic Advisor Council chairman C Rangarajan, that the current account deficit in 2012-13 is likely to be in the region of the last financial year's level of 4.2% of the GDP and are not a thing to worry as capital inflows through FDI, FII, external commercial borrowings or NRI deposits were adequate to cover the gap. Supportive cues from Asian markets also provided the much needed support to local markets after the US Congress backed a deal to avert a fiscal cliff of drastic tax rises and spending cuts in an upbeat start to the year for regional markets. Back home, sentiments were strongly supported by technology and software space, which helped frontline indices to end above their crucial 6,000 (Nifty) and 19,750 (Sensex) levels. Stocks like Infosys, TCS, Wipro and HCL Technologies edged higher in the trade on expectations of better-than-expected third-quarter earnings for IT companies when they report results starting later this month. Some support came in from metal counters as stocks like Tata Steel, SAIL, Sterlite Industries, Hindalco and Sesa Goa surged as LMEX, a gauge of six metals traded on the London Metal Exchange, jumped 3.68% to 3,581.70 on January 2, 2013. Meanwhile, shares of gold loan firms like Manappuram Finance and Muthoot Finance edged higher after the Reserve Bank of India report on January 2, 2013, proposed increasing the loan-to-value ratio of gold loans to 75% from 60% currently. Finally, the BSE Sensex gained 50.54 points or 0.26% to settle at 19,764.78, while the S&P CNX Nifty rose by 16.25 points or 0.27% to end at 6,009.50.