Morning Be!!......Indices Up,after the RBI surprised the markets with a wider-than-expected 50 bps cut in the CRR

Indian Markets

The key Indian equity benchmarks have advanced in early morning trade, extending the previous session's stellar rally after the RBI surprised the markets with a wider-than-expected 50 bps cut in the CRR. Many experts see this as a precursor to a rate cut in the coming months.

However, the central bank has flagged several potential risks to its monetary stance. So, a reversal in its rate hike cycle may not materialise before its April policy meeting.

The undertone is also upbeat on the back of strong gains in other Asian markets like Japan and Australia despite a whole host of downbeat news. The January rally in part has been driven by robust inflows from the overseas investors. FIIs have poured in more than US$1bn into Indian equities after valuations dropped in the wake of last year's 25% fall in the BSE Sensex.

But, read the full RBI policy statement and there are ample reasons for one to be cautious. The biggest of them is the Government’s messy fiscal position. Whether the Centre obliges the RBI Governor and rectifies the situation on its finances remains to be seen. Given the context, Union Budget would be interesting this time around.

Major Results Today:

Alstom Projects, AP Paper, Asahi India, BEML, BOB, Deepak Fertilizers, Future Capital, Himatsingka Seide, Indian Hotels, IRB Infra, Sesa Goa, Union Bank, Vijaya Bank, REC, Patni computer, Oracle Financial, L&T Finance, Kirloskar Oil Engines, Tata Communications, Tata Global Beverages, Sterlite Technologies, PTC India Financial and JB Chemicals

US and European Markets

U.S. stocks ended mostly in the red on Tuesday as investors awaited progress on Greek debt talks and waded through another batch of corporate results. Dow Jones lost 33 points, or 0.3%, and S&P 500 shed 1 points, or 0.1%. Nasdaq managed to gain 2 points, or 0.1%.

European stocks fell Tuesday, as investors awaited further news on Greek debt negotiations, after euro-zone finance ministers rejected an offer from private bondholders to help restructure the country's debt. Britain's FTSE 100 slid 0.5%, DAX in Germany dropped 0.3% and France's CAC 40 lost 0.5%.

Asian Markets

Today, the Asian markets are trading in the green with Strait times & KOSPI trading up by 0.9% each. Nikkei is trading up by 1%. While the other Asian markets including Shanghai, Hang Seng & Taiwan are closed. SGX Nifty is trading higher by 37 points.

Currencies

The Indian Rupee erased most of its intraday gains on US Dollar demand from oil refiners on Tuesday, after hitting a 10-week high, driven by local shares that rose on expectations the central bank will shift its policy towards boosting growth.

Commodities

Among the metals, only Zinc ended higher by 1.6% while Nickel fell by 1.7%. Copper and Aluminium ended lower by 0.8% and 0.2% respectively. Oil for March delivery decreased 63 cents to settle at $98.95 a barrel. Gold futures for February delivery fell $13.80 to settle at $1,664.50 an ounce.

Key events to watch for today

India : IIP Core (YoY)

Outlook

The Indian Markets are likely to open higher following positive global cues. However, at higher levels it could witness some profit taking later during the day. Immediate resistance levels for the Nifty stand at 5200. Downside support to watch is at 5034. Among the sectoral indices, Banks, Capital Goods & Metals could do well.

Among the other potential risks include possible reversal in the USD-INR, crude oil and limited pass-through on domestic fuels. The short point is, one should not get carried away with January’s rally, which is partly driven by FII flows. Be vigilant and look at the bigger picture. In the short-term, things could turn bad again. Apart from the domestic risks mentioned, markets might be hit by unforeseen accidents on the external front, especially from Europe.