Markets to get a cautious start of the new week

The Indian markets gave a Midas touch to the Diwali week and both the benchmark indices surged gaining around 3 percent each on the last trading session, crossing their crucial levels. Today, the start is likely to be cautious as the European euphoria has fizzled out and the marketmen will be rather concentrating on the domestic developments and the ongoing earning season where the dismal performance of auto major Maruti Suzuki is likely to trigger earnings downgrade in the India Inc..The company has reported a 59.8% year-on-year drop in net profit to Rs 240.4 crore, mainly due to prolonged labour unrest in the companies’ Gurgaon unit. Also there will be some buzz in the pharma sector as the draft pharmaceutical policy has proposed price control on nearly 350 essential medicines-on drug companies. According to the policy, the ceiling price would be fixed on the basis of Weighted Average Price (WAP) of the top three brands by value (moving annual total value). Manufacturers would be free to fix any price for their products equal to or below the ceiling price.

Meanwhile there will be some impact of C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (PMEAC) statement who had earlier estimated GDP growth at eight per cent in 2011-12, has now said that “The economy will grow in the range of 7.5-8 per cent...it may be 7.8 or 7.7 per cent'.

Also there will be lots of result announcements that will keep the markets buzzing, 3M India, Alok Inds, Dena Bank, Bata India, ICICI Bank, BPCL, Dabur India, Wipro, United Brew Hldg, United Breweries and lots of SU banks are among the many to announce their numbers today.

The US markets made a mixed closing on Friday, the trade remained volatile and despite some good economic reports Nasdaq could not manage a close of green. The Asian markets too have made a similar start and some of the indices are trading marginally in red. Chinese market has declined after the government there shuffled its financial and securities regulator, while the Japanese market is trading in green as Yen weakened against dollar on speculation of government intervention in markets to weaken its currency.

Back home, Indian benchmarks extended their Diwali celebrations on the last trading session of the week. It looked like the bears just ceased to exist as there was little evidence of profit booking through the day. The festivities got bigger after the two session break in observance of the festival of lights as frontline equity showcased an awe-inspiring performance by vivaciously rallying by a massive three percentage points in the session and re-conquering the 5,350 (Nifty) and 17,800 (Sensex) bastions. Sentiments got bolstered after the European policy makers approved a three-pronged agreement which will help in easing Greece’s debt burden and strengthen banks and the European bailout fund. As per the tripartite agreement, private investors would accept a loss of 50% on Greek bonds, which will cut Greece’s debt burden to 120% of GDP by 2020, banks will be forced to raise more capital to protect them against losses resulting from any future defaults and approved a crucial mechanism to boost the EFSF to an estimated 1 trillion euro. Friday’s sharp rally for the local benchmarks appeared even more marvelous given the fact that the gains came on a day when equity indices in Europe traded on a sluggish note while none of the counterparts in the Asian region were able to match the colossal gains that domestic indices settled with. Earlier on Dalal Street, the Sensex got off to a gigantic over six hundred point gap up opening as investors rejoiced after Euro-zone policy makers approved a concrete blueprint to rescue the region from debt trouble. In no time the indices tapered to lower levels but continued to tread in a tight range thereafter. The frontline gauges hit intraday lows in early afternoon trades after the unimpressive European market opening but a sudden spurt in sentiments was witnessed thereafter in mid-noon trades which helped the indices to settle around more than two month high levels by the end. On the BSE sectoral space, the metal counter showed sharp upmove and surged close to six percent amid global rally in commodity prices on hopes of an optimistic global economic outlook. While the rate sensitive banking pocket too appeared in resurgent mood after reports that the ministry of finance has indicated that it is likely to approve capital infusion into public sector banks, including State Bank of India by mid-November. Finally, the BSE Sensex surged by 515.97 points or 2.92% to settle at 17,804.80, while the S&P CNX Nifty soared by 158.90 points or 3.05% to close at 5,360.70.