Markets likely to consolidate after a huge rally

The Indian markets got a huge relief rally after a long lull. Traders sitting on the sidelines went for a short covering and value buying, as most of the stocks were trading in the oversold region. All the sectoral gauges ran vehemently with commodity taking the lead on expectation of demand revival from Europe. The retail stocks that surged in previous session on governments approval for FDI, suffered a setback with government’s backtracking after many of its allies and opposition parties pressed for the reversal of the decision. Today, the start of the market is likely to be flat-to-cautious and the retail stocks are again likely to remain under pressure. Parliament was adjourned for a fifth day amid uproar from legislators. Though, the government appeared determined on not to roll back its decision and possibility are that it might postpone a decision on its implementation by referring it to an empowered group of ministers. Some profit booking is also expected in the commodity stocks after a sharp surge in last session. However, there will be lots of scrip specific actions to keep the markets buzzing.

The US markets rejoiced after a weekend and the major indices surged on the back of strong start to the US holiday shopping season. Also, there was report that New-home sales in US increased 1.3 percent last month to a seasonally adjusted annual rate of 307,000. In the European, efforts heated up to ease Europe’s sovereign debt crisis, while the Asian markets have made a positive start riding on the hopes of a solution to the debt crisis in Europe.

Back home, after weeks of appalling feats, Indian benchmark indices finally showcased a fascinating performance on the first day of a new week by vehemently amassing massive gains of three percent in the session, re-conquering the psychological 16,150 (Sensex) and 4,850 (Nifty) levels. The frontline indices took a quantum leap registering the best gains since late August. The relief rally finally came through as re-energized market bulls enthusiastically resorted to hunt for undervalued but fundamentally strong bargains amid highly sanguine sentiments prevailing in markets across the globe. The sharp upmove was mostly seen as a technical bounce following the brutal mayhem that had pulled stocks in oversold territory. Local bourses remained firm despite the IMF denying reports that it was discussing a rescue package with Italy which had earlier spurred optimism in global markets. Earlier on Dalal Street, the benchmark got off to a gap up opening on the back of encouraging leads from Asian peers which mostly traded with strong gains of around two percent. The frontline indices gathered momentum thereon and commenced the northbound journey with great conviction. There appeared no resistance what so ever throughout the session as the indices kept conquering one psychological level after another. The indices surged from strength to strength and the journey halted only with the end of session around the highest point of the day. Finally the NSE’s 50-share broadly followed index Nifty, accumulated close to one hundred fifty points to settle above the crucial 4,850 support level while Bombay Stock Exchange’s Sensitive Index or Sensex garnered a massive about five hundred fifty points and ended above the psychological 16,150 mark. Moreover, the broader markets traded on an optimistic note through the session, but failed to match the fervor displayed by their larger peers and settled with gains of over one and half a percent. On the BSE sectoral space, Metal and rate sensitives which went through turbulent times in of-late witnessed huge position build-up in the session while the Oil & Gas and PSU pockets too were amongst the swiftest of gainers. Finally, the BSE Sensex surged by 471.70 points or 3.01% to settle at 16,167.13, while the S&P CNX Nifty climbed 141.25 points or 3.00% to close 4,851.30.

The US markets surged on Monday, posting their best day in at least a month after US Thanksgiving weekend retail sales jumped to a record and speculation grew that European leaders will do more to tame the debt crisis. In the US, retail sales totaled $52.4 billion during the holiday weekend, with the average shopper spending $398.62, up from $365.34 for the year-earlier period. Also, the markets maintained its upward momentum after the government reported sales of new single-family homes rose 1.3% in October to a yearly rate of 307,000. However, September sales were revised down to 303,000 from a first read of 313,000.

Besides, Fitch Ratings affirmed the US’s AAA long-term foreign and local currency issuer default ratings. The outlook on the long-term rating was revised to negative from stable, with Fitch stating that a failure to reach a credible deficit reduction plan in 2013 and a worsening economy could lead to a downgrade.

In Europe, It seems leaders are coalescing around a plan for greater integration of the European Union in terms of fiscal policy. The Wall Street Journal reported euro-zone leaders were discussing a fiscal pact among the currency bloc’s members that would make budget discipline legally binding and enforceable by European authorities. However, Moody’s lowered the credit rating of Belgium by one notch and last Portugal and Hungary suffered credit downgrades as well. The OECD lowered global growth outlook and warned EU leader to take decisive actions.

The Dow Jones industrial average gained 291.23 points, or 2.59 percent, to 11,523.00. The Standard and Poor’s 500 closed higher by 33.88 points, or 2.92 percent, to 1,192.55, while the Nasdaq composite gained 85.83 points, or 3.52 percent, to 2,527.34.

Crude prices ended higher on Monday supported by the robust US Thanksgiving weekend retail sales numbers and re-emerging hopes that Europe's debt crisis would be contained and could lift oil demand. The prices moved higher in early trade but Geopolitical tensions tied to Iran's nuclear program and speculation of further sanctions by western governments against it, led to paring most of the gains.

Benchmark crude for January delivery settled at $98.21 a barrel, gaining $1.44, or 1.49 percent, after trading in a range from $97.13 to $100.74 on the New York Mercantile Exchange. In London, ICE Brent crude for January settled at $109, rising $2.60, or 2.44 percent on ICE.