Markets to make a cautious start, may consolidate after the big rally

The Indian markets remained in a euphoric mood in last session with benchmarks despite suffering some profit booking in last, managed to gain over a percent, riding high on exit poll results. Today, the start is likely to be a bit cautious and some consolidation can be expected after the big rally. Traders will be analyzing global ratings agency Moody's caution that that there could be downward pressure on India's sovereign rating if growth weakens further and high inflation persists. However, in some solace the gross direct tax receipts of the government in April-November period this year rose by 13.18% from a year ago to Rs 3.7 lakh crore, though a bit lower than the 18% growth officially projected. Net direct tax receipts in the same period rose 14.6% to Rs 3.1 lakh crore. Marketmen will also be eyeing the parliament’s winter session that started on Thursday, as the Finance Minister P Chidambaram has reached out to opposition BJP to get Parliament approval for the long-awaited Insurance Bill and Direct Taxes Code Bill. In what could be a  positive news for the ailing PSU oil marketing companies, for the first time in more than a decade, diesel demand has declined this fiscal as monthly price hikes and increased power generation clipped consumption of India's most consumed fuel.

The US markets after moving mostly lower over the course of the trading day, ended with modest loss in last session, on concerns about the outlook for the Federal Reserve's stimulus program after initial jobless claims fell for the week passing by. The Asian markets have mostly made a weak start with some of the indices heading for their biggest weekly drop since August, though Japanese market was in green as the yen weakened against dollar.

Back home, Indian equity benchmarks exhibited a strong performance on Thursday with frontline gauges garnering gain of over a percentage point, buoyed by hopes of 4-0 sweep for Bharatiya Janata Party (BJP) in state elections. 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 the psychological levels of 20,950 (Sensex) and 6,200 (Nifty). Sentiments remained up-beat since beginning as key bourses opened with a huge gap on upside after exit polls suggested a strong showing for the key opposition party in state elections held since November. Results for state elections are due on Sunday. Confirmation of a strong showing by the opposition Bharatiya Janata Party would bolster the chances of victory in general elections due by May. Some support also came in from currency front, as the rupee reached to its strongest level against the dollar in a month. However, the markets came off their day’s highs as select investors started booking profits on higher levels after Moody Investors Service, while retaining its stable outlook of India’s lowest investment grading, warned that country could be downgraded if the government adopts policies that harm fiscal and growth scenario. Some portion of bourses’ gains were also tempered as no business was transacted on the first day of Parliament’s Winter Session, which began on Thursday, as the opposition strongly opposed the centre’s move to bring the Anti-Communal Violence Bill among other important legislations. Global cues remained sluggish, as most of the Asian equity benchmarks ended the session in the red. Moreover, European markets too made a flat start. Back home, rally in oil and gas counter too supported the sentiments, as the Paris-based International Energy Agency said that India would be the largest single source of growth in global oil demand after 2020. Meanwhile, telecom stocks viz. Idea Cellular, Bharti Airtel and Reliance Communication all edged higher after the Cellular Operators Association of India (COAI) said that GSM mobile operators added 16.6 lakh new subscribers in rural areas in October to take the overall base in such areas to 27.43 crore. Finally, the BSE Sensex surged by 249.10 points or 1.20%, to settle at 20957.81, while the CNX Nifty gained 80.15 points or 1.30% to settle at 6,241.10.