Indian markets snap six-day losing streak; surges over one and half percent

Indian equity indices witnessed a strong bounce back today to finally break the six days streak of closing in the red. The NSE's 50-share broadly followed index, Nifty garnered triple digit gains to end above the psychological 5,850 support level while the Bombay Stock Exchange's Sensitive Index--Sensex-- accumulated well over one and half a percent points to settle above the crucial 19,500 mark. Investors remained optimistic right from the start of trade as positive global cues helped them to overlook the three 'I's viz. Inflation, Interest rates and IIP numbers, which of late have been weighing heavily on the Indian  indices. The broader markets that have been underperforming too moved higher and the BSE's midcap and smallcap indices settled with around one and half a percent of gains. In the meantime, government released weaker than expected industrial production (IIP) numbers which expanded at a miserable pace of 2.7%, way below consensus estimates of 6.5%, against a robust 10.3% in the previous month. On a day of a complete turnaround for the Indian bourses, the Consumer Durables counter went home with a sharp uptick of 4.64% as it remained the top sectoral gainer on BSE with Whirlpool and Titan Industries zooming 9% and 7.96% respectively. Rate sensitive counters like Banking, Auto and real Estate ended the day with smart gains as investors speculated the Reserve Bank of India (RBI) to take cautious step after a dismal IIP numbers. However, the Capital Goods pack remained the only laggard in the BSE sectoral space which registered a marginal decline of 0.18%.

On the global front, cues remained upbeat right from the start of trade today as all Asian equity indices rose as sentiments got a lift tracking the firm close in overnight US markets and on improving prospects of the global economic recovery.  All key benchmark indices in Europe were trading on a sturdy note with DAX being the biggest gainer in the space after surging over a percent point. The screen trading for US index futures also indicates that the Dow could climb 0.52% at the opening.

Earlier on the Dalal Street, the benchmarks managed to carry forward the momentum from yesterday's late rebound and got off to a strong start. The indices traded in the positive terrain in the initial hours, but due to lack of conviction traders opted to book profits at higher levels while the surprisingly low IIP numbers too weighed down the frontline indices to intraday low levels in the late first half session. However, the second half saw the bourses gain impetus as sanguine European markets provided support. The indices continued to gradually garner strength to strength in the dying hours and closed around the high point of the day. Volumes were substantially higher than yesterday at around Rs 2.06 lakh crore while the turnover for NSE F&O segment too remained on the higher side at over Rs 1.87 lakh crore. The market breadth on the BSE was positive as there were 1831 shares on the gaining side against a 1050 shares on the losing side while 138 shares remained unchanged.

On Charts: The S&P CNX Nifty has not closed above 5880 level which was a very crucial level,  going forward its next support levels will be around 5748 and 5640 and resistance will be around 5880 and 5940.

Finally, the BSE Sensex zoomed 337.76 points or 1.76% to settle at 19,534.10 while the S&P CNX Nifty jumped 109.15 points or 1.90% to end at 5863.25.

The BSE Sensex touched a high and a low of 19,574.63 and 19,048.56, respectively. Sterlite Industries up 6.49%, Tata Motors up 4.83%, ICICI Bank up 4.47%, TCS up 3.28%, HDFC up 3.13% were the major gainers on the Sensex.

On the other hand, Bajaj Auto down 1.52%, L&T down 1.43%, HUL down 1.29%, Cipla down 0.86% and Tata Power down 0.86% were the major laggards on the index.

The BSE Mid-cap and Small-cap indices rose 1.68% and 1.42%, respectively.

Meanwhile, in a much awaited move, the Indian market regulator has allowed local exchanges to introduce derivatives based on global indices. The Securities and Exchange Board of India (SEBI) on Tuesday issued the guidelines for introducing such derivatives contracts. This has cleared the way for Indian investors to trade in leading global indices, including the S&P 500 or the Dow Jones Industrial Average (DJIA).

The regulator said domestic exchanges would be able to provide trading in derivatives contracts of 24 global exchanges located in the Americas, Europe, Asia Pacific and West Asia. Some of the bourses given in SEBI's notification are Nasdaq, Hong Kong Exchanges, Singapore Exchange, Brazil's Bovespa, Chicago Mercantile Exchange (CME) group, Tokyo Stock Exchange Group and the Australian Securities Exchange. However, the name of the London Stock Exchange, with whom both the National Stock Exchange and the MCX SX tie ups, was not on the list approved by the regulator.

The regulator has also placed some conditions on such derivatives. The underlying index must have a market capitalisation of at least $100 billion and it should consist of at least 10 stocks. Further, no single constituent stock should have more than 25% of the weight, computed in terms of free float market capitalisation, in the index.  In case after the introduction of a derivative, the underlying index fails to meet the eligibility criteria for three consecutive months, no fresh contract should be introduced on that index.

Some other conditions associated with such derivatives mandate that contracts be denominated and settled in Indian rupees and trading be restricted to Indian residents. Further, the position limits that are applicable to domestic stock index derivatives will also be applicable to derivatives of foreign indices. The exchanges which introduce this product will have to make available price-sensitive information and any regulatory or other action in the underlying index to Indian investors.

All the sectoral indices with an exception of Capital Goods (CG), which was down 0.18%, were trading in the positive territory. Consumer Durables (CD) up 4.64%, Realty up 3.27%, Metal up 2.80%, Bankex up 2.66% and Auto up 2.02% were the major gainers in the BSE sectoral space.

India's Planning Commission said on Wednesday that growth in the index of industrial production (IIP) over the current financial year was likely to be around 10%. Earlier, data released by ministry of statistics showed that industrial growth in November 2010 slowed down sharply to 2.7% compared with 10.3% in the previous month.

Given the fact that cumulative growth in the IIP over the April-November period has come down to 9.5% after the latest reported data, achieving an average of 10% over the fiscal would require over 10% expansion during rest of the months in current fiscal (Dec-Mar). This however looks very difficult given that the manufacturing has shown some slowdown in recent months and also base effect will be rising.

In fact, most economists agree that over rest of the current fiscal, IIP growth will continue to be around 4-7% range. This is because the index was growing at extremely strong pace over the same months of the previous fiscal. This will automatically make the year-on-year growth look smaller. For instance, growth in IIP in December was close to 18%. Such a high growth means that even if production is reasonably strong in Dec this year, growth in comparison to Dec last year will be rather small. Even a 5% growth in Dec 2010 would require strong industrial expansion on sequential basis.

Independent research organizations have already lowered their estimates of IIP growth for the fiscal. Most researchers now expect 2010-11 average IIP to show a growth of 8-9% from last year's level. This figure can be achieved even if the IIP grows at a more reasonable pace of say around 5-7% over next four months. While growth in December is expected to be lower owing to base effect, analysts expect things to improve somewhat in January and February.

The S&P CNX Nifty touched a high and a low of 5874.20 and 5711.30, respectively.

The top gainers on the Nifty were Suzlon Energy up 12.63%, Sterlite Industries up 7.46%, Tata Motors up 5.44%, ICICI Bank up 4.50% and Reliance Capital up 3.80%.

On the other hand, Bajaj Auto down 1.59%, L&T down 1.04%, Tata Power down 1.04%, HUL down 1.02% and Maruti Suzuki down 0.34% were top losers on the index.

European markets were trading in the green on Wednesday. France's CAC 40 gained 1.43%, Germany's DAX added 1.33% and Britain's FTSE 100 rose 0.36%.

All the Asian equity indices finished the day's trade in the positive terrain on Wednesday as sentiments in the region got a boost tracking supportive cues from US markets, which closed on a firm note overnight. The sentiments also got supported on news that Japan will buy bonds from a eurozone rescue fund to help finance Ireland's bailout and support the debt-hit bloc. However, gains remained limited for all the markets barring Jakarta Composite and Hang Seng as investors remained cautious on Europe's debt crisis.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,821.00	15.60	0.56
Hang Seng	24,125.61	365.27	1.54
Jakarta Composite	3,554.77	99.64	2.88
KLSE Composite	1,566.49	3.55	0.23
Nikkei 225	10,512.80	2.12	0.02
Straits Times	3,244.94	3.45	0.11
Seoul Composite	2,094.95	6.63	0.32
Taiwan Weighted	8,965.00	33.64	0.38

Unit-8, 3rd Floor, First Mall, The Mall, Ludhiana-141001, Punjab (INDIA).

To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?TJzsLEwstCyc7OysHMyctEa0HOwcjEzsrA==