Sensex spurts on global bounce...RBI meet eyed

The Indian markets ended with smart gains for the second straight trading session on Wednesday with the NSE Nifty shutting above the 5050 levels while the BSE Sensex ended above 16,800 levels.

Overnight gains in the US markets coupled with positive trend across Asian as well as European markets today lifted the Indian benchmarks. Sentiment got a boost after government data showed a drop in food inflation in the early days of September.



Annual inflation in the Food Articles group fell to 9.47% in the week ended September 3, from 9.55% in the previous week. It was at 15.16% in the corresponding period of last year.

Finally, the BSE Sensex ended at 16,876, adding 167 points. It had earlier touched a day's high of 16,922 and a day's low of 16,545. It opened at 16,837. The NSE Nifty closed at 5,076, up 63 points.

Today’s rally was led by interest rate sensitive stocks. The Realty, Banking and Auto indices on the BSE were among the top gainers. The IT and Telecom indices were among the other notable gainers.

The BSE Mid-Cap and the BSE Small-Cap indices also advanced. On the other hand, the BSE Capital Goods and BSE FMCG indexes ended in the red.

Technically, the NSE Nifty has filled the falling gap which was created on September 12. On the daily charts, the Nifty has formed a hammer pattern.

A hammer on a daily charts appearing after a rally should be dealt with caution. Although hammer is a bullish pattern it has a negative implication when it appears near the resistance levels. An opening and close below 5050 would corroborate a trend reversal.

"World equity indices rallied after German and French leaders reaffirmed their full backing of Greece in the latter's efforts to meet its budget targets and avert a debt default. Italian government winning a vote of confidence over its austerity package and talk of euro bonds have also helped shore up the sentiment across global markets.

But in India, investors remain on tenterhooks before the RBI's policy announcement tomorrow. Majority of economists are forecasting another 25 bps rate hike from the RBI on Friday despite tell-tale signs of slowdown.

A pause (if at all it materialises) will be accepted by markets gleefully. What the RBI says in its policy statement will be crucial. The short-term sentiment will be driven by the outcome of the RBI meet and overseas events," says Amar Ambani, Head of Research, IIFL - India Private Clients.