Markets likely to make a jubilant start of the Diwali and F&O expiry week

The Indian markets closed lower in last session, mainly due to the worries of the global uncertainty, though there were some result disappointments too but the market remained cautious ahead of the European Union summit and the RBI’s monetary policy review. Today, the start of the holiday shortened F&O expiry week is likely to be good as the other Asian peers are showing strength.  Though, the cautiousness is likely to remain in the rate sensitive sectors, a day ahead of the RBI’s policy review, its being expected that RBI governor Duvvuri Subbarao will toughen his hawkish stance and will go for another rate hike of at least 25 basis points. The governor will raise the key repo rate - the rate at which the RBI lends to banks - by 25 basis points to 8.5% and probably cut economic growth forecast from the current 8%, when he places the quarterly monetary policy review on Tuesday. Meanwhile, Finance Minister Pranab Mukherjee has said that there was need for better coordination between fiscal and monetary policies to effectively tackle the global economic turmoil and better coordination between fiscal and monetary policies would help improve 'overall economic stability and growth. Telecom stocks too will be buzzing as a Delhi court has accepted all the charges leveled by the CBI against the 14 individuals and three companies. Apart from this there will be various result related reactions, few important one which announced their numbers during weekend and many to be announcing their numbers today. Container Corp, Gail India, ITC, Pfizer, Sterlite Industries, Titan Industries, Union Bank and Wyeth will announce their September quarter numbers.

The US markets made a good bounce back on Friday on hopes of an early resolution to the European debt crisis and indication of some stimulus measures by the Fed. The major indices that were inching towards a weekly loss recovered to snap the week in green. The Asian markets have made a good start today and most of the indices are trading higher by 1-2 percent after EU leaders made some progress towards a strategy to fight the euro zone’s sovereign debt crisis on Sunday, nearing agreement on bank recapitalization and on how to leverage their rescue fund to try to stop bond market contagion.

Back home, Indian frontline equity indices snapped a distressing session with cuts of about a percent on the last trading session of the week. The key gauges after a volatile trade got dragged way below the neutral line in the dying hours of trade after the index heavyweight Larsen and Toubro got butchered by over three and half a percent post announcing second quarter numbers and guidance that were below street’s expectations. The markets exhibited unenthusiastic trends right from the start of trade, lacking any significant upside cues. Marketmen continued to indulge in stock specific activity amid a slew of earnings announcements. Sentiments at large remained cautious as investors across the globe remained on the edge ahead of this weekend's European Union summit. Hopes that a solution to the European debt woes would be unveiled by Sunday were dashed after officials called for convening another summit next week on Wednesday, where France and Germany will divulge out further details on the plan. Back home, the benchmarks traded amid high volatility ahead of the October series futures and options contract expiry scheduled on Tuesday while the RBI monetary policy review meet too is scheduled on the same day where it is largely expected to hike key interest rates in its endeavor to rein in inflation.  Earlier on Dalal Street, the benchmark got off to a sedate opening as investors lacked conviction to build fresh positions and appeared unperturbed by reports that Germany and France want euro-region leaders to agree on an ambitious plan. The key gauges soon climbed into the green terrain and traded in a narrow band but in the green zone through the morning trades. However, the trade turned choppy in afternoon trades and the indices see-sawed around the neutral line for most part of noon but dived deeper in the dying hours post L&T’s disappointing earnings and guidance. On the BSE sectoral space, the rate sensitive Realty pocket bore the maximum brunt and got pounded by two percent while the Capital Goods counters too witnessed hefty bouts of profit booking and dived by about two percent due to huge sell-off in bellwether L&T. On the flipside, only Consumer Durables index settled on a positive note with marginal gains. Finally, the BSE Sensex lost 151.25 points or 0.89% to settle at 16,785.64, while the S&P CNX Nifty declined by 41.95 points or 0.82% to close at 5,049.95.