Markets to extend the gains with a positive start

The Indian markets vehemently surged in last session after the better than expected numbers of Infosys and the benchmark indices moved higher by over two and half a percent for the day. Today, the start is likely to be in green and the markets are likely to extend the upmove further. The rate sensitive sectors are likely to remain in lime light a day ahead of the monthly inflation numbers as the RBI Governor Duvvuri Subbarao, maintaining its tight monetary stance has said that inflation must ease before the central bank can reduce interest rates. He further said that "We are deeply sensitive in making India a low interest- rate regime but that will take time," However, the PSU oil companies may get some respite as the crude prices showed sign of easing after five days of gains. Also, the export oriented companies may see some spurt as Exports maintained robust growth rate even as the government warned of a moderation in tempo in the months. Exports increased by 52% to $160 billion during the first half of the current financial year. There will be scrip specific actions to keep the markets buzzing with some result announcements too.

The US markets despite paring a major portion of their gains managed a close in positive terrain. Slovakia’s new government approved the measures to shore up Europe’s banks and address the Union’s debt crisis that boosted the investors’ morale. Also the European Commission set out its plan to shore up European banks in the face of the region's sovereign-debt crisis. The Asian markets have made a positive start and most of the indices are trading higher by about a percent on positive development in Europe and as Federal Reserve said it talked about more asset purchases to boost growth.

Back home, it turned out to be a marvelous bounce back for the Indian frontline equity indices as they not only recovered strongly from the intraday low levels but also overcome the previous session’s consolidation mood on Wednesday. The benchmark indices vehemently rallied by over two and half a percentage points, re-gaining various crucial psychological levels in their northbound journey. But the highlight of the session was the astonishing resurgence on Infosys which apart from skyrocketing by close to seven percent, also went on to underpin overall market sentiments post announcing the better than expected second quarterly earnings numbers. Infosys reported a second quarter consolidated net profit of Rs 1,906 crore up by 10% from a year ago, while its revenue increased by around 17% to Rs 8,099 crore for the quarter. Moreover, the investors sensed relief as it only marginally cut its US dollar revenue guidance for the full year due to the uncertainties in US and European countries. This development led a rally in the IT sector stocks that have been battered recently on concern of slow demand from US and Europe. Furthermore, market participants even went on to overlook the disappointing IIP readings for August, according to which IIP, with base 2004-05, expanded by of 4.1%, down from 4.5% for the corresponding month last year, and higher than the revised growth rate for July. After the below expectation IIP numbers, Friday's WPI number will be the main determinant of RBI’s policy action in its next policy review meet as the central bank continue to put its concentration on inflation over signs of slowdown in consumption and production indicators. The frontline indices showed signs of easing in noon trades owing to the weak IIP numbers coupled with soft start of the European markets. However, marketmen showed renewed vigor and resorted to relentless buying after the indices touched intraday lows in early noon trades as speculations that RBI would relent on its rate hike spree filliped investors’ morale. The northbound journey only concluded with the close of the session helping the key gauges in staging a sharp bounce back after a day of consolidation. On the BSE sectoral space, buying was evident across the board and investors piled up hefty positions in the Information Technology counter which rocketed by over five percent while the rate sensitives like Bankex and Realty pockets too gained from strength to strength and climbed by about three percent each. Finally, the BSE Sensex climbed 421.92 points or 2.55% to settle at 16,958.39, while the S&P CNX Nifty soared by 125.05 points or 2.51% to close at 5,099.40.

The US markets climbed again on Wednesday, on expectations that Europe would manage its debt trouble and on positive domestic earnings expectations. The European Commission President Jose Manuel Barroso laid out a plan to shore up the debt-embattled banks, the issuance of a sixth loan to Greece and a quicker start for a permanent-rescue fund to get a handle on Europe’s debt trouble. Meanwhile, the major indexes had picked up steam after the release of minutes from the last Federal Open Market committee’s meeting in late September, which had some central bankers looking to retain the option of more additional asset purchases to bolster the economy. The Federal Reserve stated that some officials last month wanted to keep further asset purchases as an option to boost the economy as policy makers saw considerable uncertainty that US growth will pick up.

Also, US House lawmakers will examine a nearly 300-page proposal by former Federal Reserve Chairman Paul Volcker to ban banks from trading for their own accounts, adding another level of scrutiny to the rule proposed by four federal regulators this week. Meanwhile, Slovakia was readying for another vote on a revised bailout fund for the region, the last of 17 euro-zone countries to do so, after political factions reached agreement to approve the enhanced rescue fund.

The Dow Jones industrial average gained 102.55 points, or 0.90 percent, to 11,518.80. The Standard and Poor’s 500 closed higher by 11.71 points, or 0.98 percent, to 1,207.25, while the Nasdaq composite gained 21.70 points, or 0.84 percent, to 2,604.73.

Crude prices snapping their five days winning streak, ended lower on Wednesday. The gain of over 13 percent in last five sessions prompted investors to book profit ahead of the inventory reports, which was likely to show crude inventories increased in the week to October 7. Also there was some pressure as the Paris-based International Energy Agency, further cut its global oil demand growth forecast, following the OPEC's lowering of its own forecast on Tuesday.

Meanwhile, the American Petroleum Institute, released its survey of US oil and fuel inventories late Wednesday. The group said oil stockpiles fell 3.8 million barrels last week, Gasoline inventories fell 1.2 million barrels, while the Distillate stocks fell 245,000 barrels according to the group.

Benchmark crude for November delivery settled at $85.57 a barrel, down by 24 cents, or 0.28 percent, after trading in a range of $84.52 to $86.59 on the New York Mercantile Exchange. In London, Brent crude for November delivery settled at $111.36 a barrel,up by 63 cents, or 0.57 percent on the ICE.