Markets to extend the jubilation with a positive start

The Indian markets despite a volatile trade posted a decent gain in last session. There was wide based buying coupled with strength in rupee that helped the markets outperform its peers. Today, the start is likely to be in green, as the global cues are good and traders will be eyeing for further boost in the rupee after the 23rd governor of the Reserve Bank of India (RBI) Raghuram Rajan indicated various measures including issue of inflation-indexed savings certificates linked to the Consumer Price Index (CPI) to retail investors by end of November. RBI is also mulling low-cost swap lines to increase foreign flow in the country. Market will also be getting some encouragement with the passage of the Pension Fund Regulatory and Development Authority Bill, 2011 in the Lok Sabha. However there will be some cautiousness too, as after the S&P, another rating agency Moody’s Investors Service Inc. has put India on notice, warning that the country’s sovereign rating outlook will depend on the depth and extent of the current economic downturn and the trends in the balance of payments situation. However, finance secretary Arvind Mayaram has allayed the fear, saying that there is no case for a ratings downgrade on India.

The US markets extended their gains for the second day as traders continued picking up stocks at lower levels. There was also a boost from auto stocks after automakers reported double digit growth in US vehicle sales in the month of August. Most of the Asian markets have made a positive start with some even trading higher by about a percent, as currencies in the region strengthened as central banks from Japan to Europe will be reviewing their monetary policy.

Back home, after a massive fall of around three and a half percent in last session, Indian equity benchmarks managed to snap the volatile day of trade near intraday high on Wednesday with splendid gains of around two percentage points, as investors opted to buy battered down but fundamentally strong stocks. After some initial volatility, markets soon gained strength as investors’ sentiment remained up-beat on the hopes that new RBI governor Raghuram Rajan will loosen monetary policy to pick up the economic growth and will take fresh measures to check the rupee depreciation. Some support also came in after Prime Minister’s Economic Advisory Council Chairman C Rangarajan pegged economic growth at 5-5.5 per cent for the current financial year and said that the economy still had the potential to grow more than the previous year’s growth rate of five per cent. But, markets faced strong resistance near their crucial 5,450 (Nifty) and 18,600 (Sensex) levels and started paring gains in noon deals after India’s services PMI contracted to 47.6 points in August, the weakest since 2009, from 47.9 points in July, indicating more contraction in this sector amidst falling volumes of incoming new work and tough economic conditions. This further resulted in the decline of composite PMI, which takes into account both manufacturing and services, to 47.6 points in August from 48.4 points in the previous month.  Weakness in European markets in early deals too dampened the sentiments over the increasing possibility of US military intervention in Syria. Moreover, most of the Asian equity indices shut shop in the red. Back home, markets started gaining strength in last leg of trade supported by sharp pull back in Indian rupee against dollar. Indian rupee, after a weak start, appreciated around a percent at the time of equity markets closing. Buying in software and technology counters continued on the back of steep rise in local currency and improving global economy. Additionally, Metal counter remained the top gainer among other sectoral indices as economic data in world's largest consumer of copper and aluminum China, showed growth in services sector in August. However, realty remained the lone loser on the BSE sectoral front, declining around half a percent on RBI’s directive to banks on home loan disbursements, which came as a big blow for realty companies that have been betting on luring schemes to pull up sagging sales. Finally, the BSE Sensex surged 332.89 points or 1.83 % to settle at 18,567.55, while the CNX Nifty climbed by 106.65 points or 2.00% to end at 5,448.10.