Markets likely to make cautious start of the new week

The Indian markets closed with big gains on Friday and all the beaten down sectors surged on hopes of revival in Europe. Today, the start of the new week is likely to be a bit cautious-to-flat and lot will depend upon how the global markets perform. However, the slew of bad news for domestic economy continues, global ratings agency Moody's has said that tough times are ahead for the Indian economy and it may revise downwards the country's growth forecast for 2011-12 to 6.5%. The logjam in parliament is likely to continue as the government is yet to find any resolution to the retail FDI issue, while one of its allies Trinmool Congress has said that it won't back the policy. However the banking sector stocks may rejoice as the expectation are rife that RBI may come up with CRR rate cut in this week only with the last date for payment of advance tax drawing closer.

The US markets despite making a flat closing snapped the best weekly closing since March 2009. Some cautiousness and slight profit booking in late hours took some early gains off, leading the indices to close flat. The European leaders will take another run at fixing the debt crisis this week after the failure of their fourth rescue blueprint intensified concerns the 17-nation euro area was on the brink of unraveling. The Asian markets have made a mixed start and some of the indices are trading marginally in red.

Back home, Indian frontline equity indices managed to extend the exuberant performance on last trading day of the week and completed a hat-trick of strong performances by re-capturing the important psychological 5,050 (Nifty) and 16,800 (Sensex) bastions. The benchmark gauges showcased an astounding performance by vehemently garnering over two percentage points, the sharp rally looked even more prominent since it came on a day when equity indices across Asia largely showed signs of consolidation while European counterparts traded on a strong note, but failed to match the fervor with which the Indian bourses soared. After trading on a subdued note through the morning trades, the local benchmarks got a boost in the afternoon tracking the encouraging European market opening. Markets across the globe rallied as the German chancellor and French President made efforts to finalize a concrete plan to strengthen euro-zone stability rules that will include a proposal to change the European Union treaty to give European institutions intervention rights into national budgets as a way to avert the onerous sovereign debt crisis in the Euro-zone. Earlier on Dalal Street, the benchmark got off to a sedate opening and even touched the intraday lows in the initial moments of trade tracking the unimpressive leads from Asian peers. The indices lacked fervor and continued to trade in a tight range in close proximity with the neutral line through the morning trades as marketmen took a breather after the previous session's sharp gains, ahead of the announcement of key US jobs report. However, the frontline gauges got a shot in the arm in early afternoon trades tracking the rally in European markets. Thereafter, the bourses treaded on a northbound journey which only ended with the close of trade. On the BSE sectoral space, the rate sensitive Bankex sector remained the top gainer in the space with over three percent gains followed by the Power counter which too settled with over three percent gains. There were no sectoral laggards in the space and barring the motorcycle maker Hero Moto, there were no other stocks in the Sensex which ended in the red terrain. Finally, the BSE Sensex jumped 363.38 points or 2.20% to settle at 16,846.83, while the S&P CNX Nifty climbed by 113.30 points or 2.29% to close at 5,050.15.

The US markets, though made a flat closing on Friday but it was the best week for the major indices since March 2009. There was good report both from the domestic and European front that helped the markets move higher in the early trade. The US unemployment rate showed a surprise drop in November. The Labor Department reported Friday that nonfarm US payrolls increased by 120,000 last month, accelerating from October’s 80,000 gain, pushing the nation’s unemployment rate down to 8.6 percent  from last month’s 9 percent and its lowest level since March 2009. The Labor Department also revised up its job gains for September and October by 52,000 and 20,000, respectively.

While, in Europe German Chancellor Angela Merkel made a speech pushing for tighter rules on government spending. Merkel said the 17 countries that use the euro must quickly restore market confidence by making financial controls stricter.

The Dow Jones industrial average dropped 0.61 of a point to close at 12,019.42. The Standard & Poor's 500 index fell by 0.31 of a point to 1,244.28.On the other hand Nasdaq composite index inched up 0.73 of a point to 2,626.93.

Crude oil prices resumed the uptrend on Friday, after a day of consolidation as sentiments got boosted on the back of encouraging US employment data which showed joblessness rate registered biggest slump since January to 8.6% in November, a two and half a year low level. The fuel prices logged best weekly performance in around three weeks amid concerns over tighter global supplies as tensions between Iran and the Western governments deepened while reports that a northeast US refinery was shutting earlier than planned too supported oil prices.

Benchmark crude for January delivery climbed 76 cents to settle at $100.76 a barrel after trading in a range of $99.76 to $101.56 on the New York Mercantile Exchange. In London, Brent crude oil for January settled $95 a barrel higher, at $109.94 a barrel on the ICE.