Markets to continue the exuberance with another green start

The Indian markets rallied with various measures announced by the Reserve Bank of India and on optimism that more will come from the new governor. Today, the start is likely to be in green and traders will be encouraged, if the rupee strengthens further. Meanwhile, industry body CII has expressed the hope that the central bank would shift towards an expansionary monetary policy by cutting interest rates to stimulate growth. Finance Minister P Chidambaram too has asserted in the Lok Sabha that rupee will correct itself and the growth will bounce back. In a positive news, gross direct tax collection grew by over 14 per cent in the first five months (April-August) of this fiscal to Rs 1.88 lakh crore against Rs 1.64 lakh crore in the same period last year. However, there will be some cautiousness too and profit booking after the slew of rally and ahead of the weekend cannot be denied in latter part of the trade as according to a HSBC survey, emerging market activity turned positive again in August, after losing traction continuously since April, but India posted the steepest rate of decline since March 2009.

The US markets continued their gaining streak for the third straight day and ended modestly higher ahead of the monthly jobs report. There were some positive economic reports that supported the markets; ADP reported that private sector employment increased by 176,000 jobs in August from the last month. The Asian markets have made a positive but cautious start on speculation that the Federal Open Market Committee will dial down bond purchases at its meeting this month if the US employment data is in line to ADP report.

Back home, extending last session’s jubilation, Indian equity benchmarks witnessed terrific day of trade with bull taking full control over the session on Thursday. Markets kick started the session with huge gap on the up-side as sentiments remained up-beat after country’s new central bank governor unveiled fresh measures to shore up the rupee and aid overseas inflows. The Reserve Bank of India (RBI) has decided to offer banks a window to swap fresh foreign currency non-resident (banks) dollar funds. These are mobilized for a minimum tenor of three years and at a fixed rate of 3.5 per cent per annum. RBI’s move follows banks’ request to consider a special concessional window to swap FCNR deposits. RBI has also decided to raise the current overseas borrowing limit of the unimpaired tier-I capital. Sentiments also got encouraged with the passage of the Pension Fund Regulatory and Development Authority Bill, 2011 in the Lok Sabha. Global cues too remained euphoric with the US markets providing the lead to Indian benchmarks in initial trade. Firm opening in European markets too provided strength to domestic bourses. Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Both the benchmarks scaled past to the psychological levels of 19,950 (Sensex) and 5,550 (Nifty). Recovery in Indian rupee too supported the sentiments. Meanwhile, shares of companies that have applied for a banking licence viz. Bajaj Finance, JM Financial, LIC Housing Finance, IFCI, L&T Finance Holdings, Muthoot Finance, India Infoline and IDFC remained on the buyers’ radar after the Reserve Bank of India (RBI) Governor Raghuram Rajan roughly indicated that new bank licenses are likely to be announced around January 2014. Sentiments also remained up-beat after shares of public sector oil marketing companies (OMCs) viz, BPCL, HPCL and IOC edged higher after crude oil fell the most in two weeks on September 4, 2013, as the US considered limiting the scale of military strikes on Syria. Finally, the BSE Sensex surged 412.21 points or 2.22 % to settle at 18,979.76, while the CNX Nifty climbed by 144.85 points or 2.66% to end at 5,592.95.