Market may rally on global cues

Key benchmark indices are likely to extend two-day rally on the back of strong global cues. However volatility is expected to remain high as futures & options contracts for January 2009 series expire today, 29 January 2009.

Asian stocks advanced today, 29 January 2009, as investors took heart from the US Congress making headway on a $825 billion stimulus spending package and other efforts to stem the financial crisis. Financial markets in Hong Kong reopened after a three-day break, but markets in China and Taiwan remained closed.

Hong Kong's Hang Seng rose 5.87% or 737.90 points at 13,316.50, Japan's Nikkei added 1.66% or 134.28 points at 8,240.57, South Korea's Seoul Composite was up 0.84% or 9.75 points at 1,167.73. However, Singapore's Straits Times was down 0.20% or 3.54 points at 1,762.54.

US stocks advanced on Wednesday, January 28, as bank stocks surged on confidence that the Obama administration was speeding a plan to remove bad assets from banks` books in an effort to revive lending.

The Dow Jones industrial average increased 179.69 points, or 2.20%, to end at 8,354.42. The Standard & Poor`s 500 index climbed 26.29 points, or 3.11%, to settle at 872. The Nasdaq Composite index increased 52.57 points, or 3.49%, to close at 1,557.47.

The Fed in its two-day meet which concluded yesterday, 28 January 2009, said it was still mulling the extreme move to buy Treasuries but would do so if it would help private credit markets, emphasising its focus on bringing down borrowing rates for consumers and companies through other asset purchases. The fed also held its target for short-term interest rates between 0 and 0.25% as expected, and vowed to keep looking at alternative tools at its disposal for boosting the economy.

Meanwhile, the US House of Representatives passed an $825 billion stimulus plan in President Barack Obama's first legislative achievement since taking office last week, with the debate now shifting to the Senate.

Back home, in a populist measure ahead of the general elections, the government on Wednesday, 28 January 2009, slashed petrol price by Rs 5 a litre and diesel by Rs 2 a liter, while the prices domestic LPG was also slashed by as much as Rs 25 per cylinder. The reduction was effective from 28 January midnight.

Volatility may rise as futures & options contracts for January 2009 series expire today, 29 January 2009. Rollover of open positions as on Wednesday, 28 January 2009, have been healthy during this series. As per reports, rollover of Nifty positions from January 2009 series to February 2009 series was 57%, higher from 53% during last series. Marketwide rollover of positions were also higher at 59%, from 55% earlier.

Tata Power, Bhel, GMR Infrastructure, Maruti Suzuki India, Cairn India, BPCL and Procter & Gamble among others will declare their December 2008 quarterly results today, 29 January 2009. Meanwhile, aggregate results of 1064 companies showed 27.60% fall in net profit on 15% increase in net sales in Q3 December 2008 over Q3 December 2007. The street was already anticipating poor Q3 December 2008 earnings from Indian Inc on high input costs, the credit crunch and high interest rates, coupled with the burden of piled-up inventories.

Foreign brokerage Morgan Stanley in its research report dated 5 January 2009 said earnings of 30 BSE Sensex firms are set for their first quarterly drop in Q3 December 2008, since the data was first made available in 1999. It estimates the BSE Sensex earnings to drop 0.2% year-on-year basis compared with a growth of 5.5% and 20% in the September 2008 and June 2008 quarters, respectively.

Foreign institutional investors (FIIs) are in selling mode after an inflow of Rs 1319.10 crore in December 2008. Their outflow in January 2009 totaled Rs 4534 crore (till 27 January 2009).

According to provisional data on NSE, FIIs were net sellers worth Rs 217.32 crore while mutual funds bought shares worth Rs 601.88 crore on Wednesday, 28 January 2009.

Buying frenzy in late trade coupled with short covering of open positions ahead of January 2009 derivative contracts triggered a solid rally in key benchmark indices for the second straight day on Wednesday, 28 January 2009. The BSE 30-share Sensex jumped 253.39 points, or 2.81%, to 9,257.47 and the S&P CNX Nifty rose 78.15 points, or 2.82%, to 2,849.50.