Markets to extend gains on penultimate day of F&O expiry

The Indian markets rallied in last session with the RBI’s policy measures coming on expected lines, as it took steps to boost cash supply for banks while raising key borrowing costs, also the rupee strengthened and supported the markets. Today, the start of the penultimate day of F&O series expiry is likely to be extension of the gains tailing the good global cues. However, there will be some cautiousness as well, as the India Inc has raised its apprehension saying that hike in key interest rate by the Reserve Bank of India will hit the already weak investment momentum and impact India’s economic growth. Also, there will be some concern in coal and mining stocks as it has been reported that the auction of coal blocks to private firms may get further delayed to March next year as the Coal Ministry has sought from consultancy firm CMPDIL a report on reserves of four more mines. There will buzz on the street as the stock exchanges, in consultation with market watchdog Securities and Exchange Board of India (Sebi), have decided to ease the norms to retain up to Rs 10,000 in trading accounts of active customers based on representations received from investors and members.

There will be lots result announcements and reactions based on them to keep the markets buzzing. Bata India, Bayer Crop, Birla Corp, DLF, EIH, Grasim Inds, Havells India, IDBI Bank, Jindal Steel, Lupin, LIC Housing Finance, Nestle India, Oriental Bank and Orient Paper are among the many to announce their numbers today.

The US markets ended mostly higher with Dow and the S&P 500 both reached new record closing highs on optimism that the Federal Reserve after its two-day policy meeting will maintain its asset purchase program. The Asian markets have made a jubilant start taking cues from the US markets and on hopes that Fed is likely to wait until at least March next year before embarking on tapering.

Back home, snapping five days losing streak, Indian equity benchmarks finally showed jubilation, with frontline indices gaining over one and a half percentage point and recaptured their crucial 6,200 (Nifty) and 20,900 (Sensex) bastions on Tuesday. After a cautious start, markets picked up pace as the Reserve Bank of India (RBI) in its second quarter review of monetary policy FY14, has hiked repo rate by 25 bps, which was on expected lines. Consequently, the reverse repo rate under the LAF stood adjusted to 6.75% and the Bank Rate reduced to 8.75% with immediate effect. Meanwhile, India’s Apex bank, further unwinding liquidity tightening measures implemented this summer as it struggled to shore up the tumbling rupee, rolled back MSF rate by 25 bps to 8.75% and thus restoring normalcy left Cash Reserve Ratio (CRR) unchanged at 4%. The RBI, however, increased the liquidity provided through term repos of 7-day and 14-day tenor from 0.25% of bank deposits to 0.5% with immediate effect. Sentiments also got some boost after data showing that foreign funds remained net buyers of Indian stocks on October 28, 2013 with foreign institutional investors (FIIs) buying shares worth a net Rs 636.78 crore on Monday. The northward journey got extended, after European markets opened in the green, moreover, reversing all their early losses, Asian markets ended mixed as investors digested a slew of corporate earnings. Back home, banking shares remained on buyers’ radar after the RBI reduced the (MSF) rate by 25 bps to 8.75 per cent from 9 per cent. Banks usually tap the MSF rate during acute cash tightness. Moreover, buying in oil and gas too aided the sentiments with stocks of public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC edged higher as the Kirit S. Parikh Committee’s report on pricing diesel, domestic LPG, and PDS kerosene is likely to suggest an immediate increase in diesel prices by at least Rs 4 a litre and, thereafter, doubling the current pace of increase in diesel prices to Re1 per month. Additionally, Auto stocks too remained in top gear, mainly driven by stellar Q2 performance of Maruti Suzuki. The company’s stocks rallied over 8% after Maruti reported 3 fold jump in Q2 net profit at Rs 670.23 crore for the quarter as compared to Rs 227.45 crore for the same quarter in the previous year. Finally, the BSE Sensex surged by 358.73 points or 1.74%, to settle at 20929.01, while the CNX Nifty gained 119.80 points or 1.96% to settle at 6,220.90.