Markets to get a gap-up start on jubilant global cues

The Indian equity markets extended their rally mood for the second consecutive day in the previous session; the optimism of recovery in the global economic environment prompted the marketmen to go for hefty buying that led to another 2 percent of gains in benchmarks. Today, the mood is looking jubilant and the indices are likely to get a gap-up start.  IT sector, one of the top performer of last session is likely to keep buzzing, a day ahead of the Infosys earnings, which will kicks off the official earnings season for the second quarter. The IT bellwether is expected to benefit from a depreciating rupee and will consequently boost the morale of its peers in the sector. However, the auto sector stocks may come under pressure as Society of Indian Automobile Manufacturers (SIAM) has said that Car sales in India may rise just 2 to 4 percent this fiscal year to next March, against an earlier forecast of 10 to 12 percent. However, commercial vehicles are forecast to grow at 13 to 15 percent, up from the earlier forecast of 12 to 14 percent.  Meanwhile, the telecom companies will keep buzzing after the unveiling of draft telecom policy. Under a draft telecoms policy, the government will let cellular carriers share airwaves, while second-generation mobile spectrum that now comes bundled with a telecoms licence will be separated and priced on a market basis, that will led to operators paying for additional network capacity, driving up their costs.

The US markets after a day of consolidation went for a huge rally on Monday after Germany and France pledged to unveil new measures within a month to resolve the euro zone debt crisis. The serious efforts led the investors go for riskier assets. Investors were also relieved that troubled Franco-Belgian bank Dexia would be partially nationalized. The Asian markets have made a strong start and many of the indices are trading higher by around 2 percent in early trade.

Back home, Indian equity indices showcased yet another courageous performance and went on to outclass indices around the world by vivaciously rallying by two percentage points in the session and settling just below the psychological 5,000 (Nifty) and 16,600 (Sensex) levels. Friday’s optimism got spilled over into the Monday’s session helping the frontline indices in extending the winning momentum for second successive session as encouraging global developments buttressed domestic sentiments. Investors continued to build hefty positions across the board as sentiments got a boost after reports that French President and German Chancellor have pledged to protect the banks and resolve the region’s lingering debt trouble that is threatening global growth. On the domestic front, telecom shares like Bharti Airtel, Reliance Communications, MTNL, Tata Tele and Idea Cellular spurted in the dying hours of the session after telecom minister Kapil Sibal unveiled the new draft National Telecom Policy 2011 with an objective to provide secure reliable, affordable high-quality telecom services anytime anywhere. Meanwhile, IT bellwether Infosys surged by over three percent ahead of its quarterly earnings announcement on October 12, which will officially mark the start of September quarter earnings season. Also, Index heavyweight Reliance Industries made its presence felt by surging over three percent in the session on reports that the company is eyeing a deal with the Indian unit of Walt Disney, to acquire content for its telecom operations. Earlier on Dalal Street, the benchmark got off to a soft start as the indices showed signs of consolidation in early trade, a session after the awe-inspiring close to three percent rally. But the frontline indices slowly but steadily started gathering steam and surged by around one and half a percent by late morning trades. The bourses further capitalized on the momentum and spurted in afternoon trades on the back of broad based bottom fishing in undervalued stocks. The northbound journey only concluded with the close of the session helping the key gauges in recovering the ground lost in the week gone by. Eventually the NSE’s 50-share broadly followed index Nifty, got buttressed by close to two percent to settle below the crucial 5,000 support level while Bombay Stock Exchange’s Sensitive Index-Sensex accumulated over three hundred points and closed just below the psychological 16,600 mark. Moreover, the broader markets too participated in the rally and closed with gains of over a percent. On the BSE sectoral space, buying was evident across the board and investors piled up hefty positions in the high beta Realty counter which rocketed by over three percent while the Consumer Durables, IT and Oil & Gas pockets too gained from strength to strength and climbed by about three percent each. Finally, the BSE Sensex jumped 324.69 points or 2.00% to settle at 16,557.23, while the S&P CNX Nifty surged by 91.55 points or 1.87% to close at 4,979.60.

The US markets surged on Monday, delivering their best one-day performance in over six weeks, as France and Germany pledged to do everything necessary to support Europe’s banks. The French and German comments gave investors hope that European officials may take bigger steps deemed necessary to control the region’s sovereign-debt crisis. German Chancellor Angela Merkel and French President Nicolas Sarkozy stated that they will deliver a plan to recapitalize European banks and address the Greek debt crisis by November 3. Also, Belgium stated that it will buy part of Dexia SA and provide security for depositors as part of a plan to rescue the lender.

Now the markets will take direction with domestic events as the Federal Reserve will release the minutes of its latest interest-rate setting meeting tomorrow and investors will also be looking ahead to a slew of big-name earnings reports later in the week. Meanwhile investors are expecting that reports of US retail sales will increase in September at the fastest pace in six months, helping to ease concern the recovery is faltering.

The Dow Jones industrial average gained 330.06 points, or 2.97 percent, to 11,433.20. The Standard and Poor’s 500 closed higher by 39.43 points, or 3.41 percent, to 1,194.89, while the Nasdaq composite gained 86.70 points, or 3.50 percent, to 2,566.05.

Crude prices continued their upmove on Monday for the fourth straight session. The European development mainly boosted the crude prices, a pledge during the weekend from France and Germany to unveil a plan to address the region’s debt woes has led the expectation of demand improvement. Also, the dollar weakened against the basket of major currencies that helped boost the price of dollar-denominated oil.

Meanwhile, a strike that halted Kuwaiti crude oil exports too supported the crude prices, Vessel traffic in and out of Kuwaiti ports was halted on Monday, including oil tanker traffic, as the Kuwait customs union went on a strike.

Benchmark crude for November delivery gained $2.43, or 2.93 percent, to settle at $85.41 a barrel, after trading in a range from $82.75 to $86.09 on the New York Mercantile Exchange. In London, Brent crude for November settled $3.07 higher at $108.95 a barrel on the ICE.