Markets to get a strong start on supportive global cues

The Indian markets made a good bounce back in second half of last session, supported by the oil companies after the government announced partial deregulation of diesel prices. The government on Thursday allowed state-run oil marketers to raise diesel prices by 50 paise per litre monthly, till their under-recoveries on sale of the fuel are eliminated, but raised the cap on subsidised LPG cylinders to 9. Although the government's decision to partially deregulate diesel is going to help PSU OMCs but it has potential to fuel inflation and may stop RBI from cutting key policy rates by the end of the month and is likely to put rate sensitives’ under pressure. Today, the start is likely to be good on jubilant global cues. The IT sector stocks are likely to be in upbeat mood as the finance ministry has said software development at client locations and deployment of personnel abroad by India's IT firms will continue to get tax exemptions. The telecom sector too will remain in action after the Union Cabinet approved a 50 per cent cut in the auction reserve price for the 800 MHz CDMA spectrum. There will be some buzz in the banking sector too, as the International Monetary Fund (IMF) has cautioned India that it should not rush to grant new bank licences to industrial houses and conglomerates.   

US stocks rallied on Thursday on getting some upbeat economy reports, the number of US workers filing for jobless benefits fell to the lowest level in five years, while the US housing starts jumped 12% last month, raising hopes of a better outlook for the still-tepid economic recovery. Most of the Asian markets have made a strong start after initial jobless claims and housing data in the US beat estimates, boosting the outlook for exporters. Also, there were hopes in the region that today China will report a higher gross domestic product numbers.

Back home, Indian equity markets resumed their northward journey after a day of halt as investors piled up positions in risky assets on hopes of growth recovery in Asia’s third-biggest economy after government allowed the oil companies to increase the diesel prices by a ‘small quantum’ periodically. Though, domestic bourses opened on a flat note amid lethargic global setup but soon, gaining steam traded strength to strength as investors continued hunting fundamentally strong but oversold bargains. Frontline indices tested the psychological 6,050 (Nifty) and 20,000 (Sensex) levels in the session and met with stern resistance around those levels but managed to finish the session with a gain of over half a percent and settled comfortably above 6,000 (Nifty) and 19,050 (Sensex) levels as investors took to hefty across the board buying. Comments by Finance Minister P Chidambaram on January 16, 2013, that the immediate priority of the government is to keep the investment cycle going also boosted sentiments. Sentiments got buttressed after PSU oil marketing companies such as BPCL, HPCL and IOC rallied after government allowed oil refiners to partially hike diesel prices in a phased manner. This will help bring down the oil subsidy burden of OMCs. While rally in software counters too supported the sentiments after slew of upbeat quarterly results by sector heavy-weights raised hopes of growth recovery in the beleaguered technology sector. HCL Technologies registered rise of 46.71% in its net profit at Rs 724.72 crore for the quarter ended December 31, 2012 as compared to Rs 493.97 crore for the same quarter in the previous year. Total income increased by 26.60% at Rs 2806.14 crore for quarter under review as compared to Rs 2216.53 crore for the quarter ended December 31, 2011. However, global cues remained choppy as European markets made a soft start and Asian counters too shut shop mostly in the red. Back home, some strength came in from PSU sector, which rose about one and a half percent after government authorized the National Investment Fund (NIF) to buy shares of public sector enterprises, including banks and insurance companies. The NIF will also be used to re-capitalize PSU banks and public sector insurance companies. Gains in stocks of CDMA operators too aided the sentiments as scrip like Reliance Communication and Tata Teleservices (Maharashtra) edged higher after the Union Cabinet approved reduction in reserve price for the auction of spectrum for CDMA by 50% from the previous reserve price. Finally, the BSE Sensex gained 146.40 points or 0.74% to settle at 19,964.03, while the S&P CNX Nifty rose by 37.35 points or 0.62% to end at 6,039.20.