Bounce back may extend

If you don't like the road you're walking, start paving another one. Dolly Parton.

The late rebound on Monday is likely to spill over into today’s session, at least at the start. The closing could also be higher if there are no nasty surprises from India Inc. and no negative news from the overseas markets.



We expect the bounce back to stretch a bit more this week. If that does happen, the Nifty is likely to meet resistance; first at 6125-6150 and thereafter at 6305. FII inflows seem to have tapered off a little lately and one needs to watch it closely.

Elsewhere in Asia, most markets are up. Chinese stocks have also recovered after a weak opening. US stocks gained on the back of Citigroup’s improved earnings and an encouraging report on the housing sector. European stock indices also rose.

Lots of results are scheduled for today. We also have the listing of Oberoi Realty Ltd. The Coal India IPO has been subscribed 0.34 times at the end of Day One. It closes on Oct. 21.

Overall, the market undertone is positive, notwithstanding two weeks of minor losses. But, one needs to be cautious as things might turn a bit volatile.

Reports suggest that IOC’s proposed FPO will be bigger than the Coal India IPO – worth around Rs190bn. A lot of public sector issues are lined up over the next few months, apart from the private issues. With these, the Government looks all set to meet its disinvestment target for FY11. The fiscal deficit picture too would look a lot better, thanks to the bumper harvest reaped from the 3G and BWA auctions.

India is pretty hot and happening right now. So, the deluge of FII money will persist even as the world economy limps along.

The opening of India’s biggest-ever IPO i.e. Coal India Ltd. will continue to hog the limelight till the shares list on the eve of Diwali. On the whole, the issue should sail through given its status as a blue chip state-run coal producer with robust existing business and compelling future prospects. How various financial markets cope with it would be watched closely. The RBI is likely to intervene as FII inflows are set to jump due to the Coal India IPO.

The BSE and the NSE have decided to implement ‘pre-market call auctions’. This is a special 15-minute trading window starting at 9 am from October 18. The main aim is to enable better price discovery in the market at the opening bell.

Shares of Oberoi Realty Ltd. will get listed today and should do reasonably well going by the response it got in its IPO.

Results Today: Alembic, Bajaj Auto, Bajaj Holdings, Cadila, Concor, Greaves Cotton, HCL Tech, HDFC Bank, Ingersoll Rand India, Mangalore Chemicals, Mindtree, Polaris, Religare Enterprises and Supreme Industries.

The FIIs were net sellers of Rs3.35bn in the cash segment on Monday (provisionally), according to the NSE web site. Local funds were net sellers of Rs12.18bn. In the F&O segment, the foreign funds were net sellers at Rs12.91bn.

The G20 summit, scheduled for this week in South Korea could be a stormy affair. Whether the top leaders are able to resolve differences over currency matters remains to be seen. For now though, the dollar remains under pressure amid rising expectations of QE2 from the Fed early next month.

Fed chief Ben Bernanke on Friday reiterated that the US central bank is considering further easing but stopped short of divulging details. Most experts believe that the Fed is going to launch a second round of asset purchases after its policy meeting that is due to conclude on Nov. 3. The question is what will a second round of quantitative easing look like.

European earnings season has also kicked off even as results trickle in from US companies. China will likely dominate market news this week, with a raft of economic reports on tap.

Investors in the US will face heavy week of earnings. A slew of housing sector reports will also be released in the US this week apart from statistics on industrial production, Fed's Beige Book survey, weekly jobless claims, leading economic indicators and the Philly Fed index.

Germany will announce ZEW survey of Economic Sentiment and IFO business outlook. Minutes from the BOE and RBA's last policy meetings will also be issued, besides UK retail sales. China's Q3 GDP and September economic indicators will also be watched closely.