Markets to remain cheerful with a positive start

The Indian markets snapping their six days losing streak surged in last session after Reserve Bank of India (RBI) in a move shedding its hawkish stance surprised the markets by unexpectedly holding key rates. There was wide expectation that multi-month high inflation will lead the RBI to go for another rate hike. The apex bank's decision was a big relief for the markets and benchmarks rejoiced with gains of over a percent. Today, the start is likely to be in green and the markets will extend the momentum taking cues from the global bourses. Traders will also be taking support with the report that despite global economic slowdown, India's exports to the US and Europe have grown in the first seven months of the current fiscal year. Exports to Europe has increased to $33.15 billion in the first seven months of the current fiscal from $31.28 billion, while the shipments to the US have risen to $23.35 billion during April-October 2013 from $21.49 billion in same period last year. Also, the Finance Ministry has said that initiatives taken by the government in the past one year will boost investment and revive the sagging growth. The sugar sector stocks will be in action, as the Union Cabinet is likely to take up the proposal of providing Rs 7,200 crore interest-free loan to the sugar industry today. There will be some buzz in the oil & gas sector too, as a Parliamentary panel has sought a review of the Rangarajan formula that will be used to price natural gas from April next year, saying the rate should be fixed after factoring in domestic cost of production.

US markets rose in last session even after the Federal Reserve announced plans to begin scaling back a monthly bond-buying program each month to $75 billion from $85 billion. The traders took cues from Fed’s statement that overall monetary policy, including interest rates at rock-bottom levels, will stay accommodative until the unemployment rate dips below 6.5%. The Asian markets have mostly made a positive start with Japanese market continuing its surge for the second consecutive day as the yen touched a five year-low against the dollar.

Back home, snapping six-day losing streak, Indian equity benchmarks finally heaved a sigh of relief with frontline gauges gaining over a percentage point. There was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated in the rally. Both the benchmarks scaled past to the psychological level of 6,200 (Nifty) and 20,850 (Sensex) after the Reserve Bank of India (RBI), in its December mid-quarter monetary policy review surprisingly, maintained a status quo stance on its key policy rates as it left the policy repo and reverse repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75% and 6.75% respectively. Further, RBI kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL). Global cues too remained supportive, while most of the Asian pacific shares ended mostly positive even with Japanese markets garnering gain over a percent, as the country saw a merchandise trade deficit of 1.292 trillion yen in November, beating forecasts for a shortfall of 1.351 trillion yen, European markets too were positive ahead of the conclusion of the US Federal Reserve’s last policy meeting for the year. Back home, some support came in from the Reserve Bank’s statement that it expects economic growth to improve in the second half of this financial year on the back of expansion in the agriculture sector, exports and movement in stalled projects. Some boost also came in from reports that foreign institutional investors (FIIs) bought shares worth a net Rs 249.93 crore on December 17, 2013, as per provisional data from the stock exchanges. Appreciation in Indian rupee too supported the sentiments. Meanwhile, interest rate sensitive counters like auto, bank and realty stocks edged higher after the RBI kept its main lending rate viz. the repo rate unchanged. Fertilizer stocks such as Rashtriya Chemical fertilizer, Coromandel International and National Fertiliser too remained on buyers’ radar after finance ministry granted Rs 10,000 crore under a special banking arrangement (SBA) as sought by the department of fertilizer to help the industry tide over the liquidity crunch. Additionally, retail stocks edged higher after Tesco Plc applied to buy a 50 percent stake in Trent Hypermarket, a unit of Tata Group’s Trent. Finally, the BSE Sensex surged by 247.72 points or 1.20%, to settle at 20859.86, while the CNX Nifty gained 78.10 points or 1.27% to settle at 6,217.15.