RTTNews - The Indian market may continue its rally on Tuesday, as fresh money from foreign funds waiting on the sidelines makes its way into the Indian stock market. Cues from the overseas markets are also favorable. Despite sharp gains in the previous session, Indian equities offer one of the best opportunities among the other emerging markets and capital flows and foreign direct investments are expected to improve considerably over the next few months.
However, there could be some volatility amid alternate bouts of buying and profit taking. A large number of retail investors, who wanted to take some profits on Monday, couldn't do so, as trading was already suspended by the time they contacted their brokers. If trading resumes normally on Tuesday, these investors may take some profits or exit their illiquid investments, which could add to some volatility.
Additionally, domestic financial institutions may also take significant amount of profits before they get back to investing aggressively. Second-line stocks could be in the spotlight, as they have largely underpeformed large-caps in the recent rally.
On Wall Street, stocks rallied on Monday, bolstered by hopes about the housing market. A report from the National Association of Home Builders said its index of homebuilder sentiment rose to 16 in May, compared to a level of 14 in April. The figure was the best reading since September, fueling speculation that the housing sector is bottoming and economic recovery may be around the corner.
Further, the report indicated that attitudes of homebuilders improved for both the present situation and for the next several months. Better-than-expected earnings from home improvement retailer Lowe's also contributed to the positive sentiment. The Dow Jones Industrial Average rose 2.85%, the Nasdaq Composite rallied 3.11% and the S&P 500 index closed higher 3.04%.
The Indian ADRs ended sharply higher across the board. Among the top gainers. Sterlite Industries climbed 26.03%, ICICI Bank soared 25.22%, MTNL jumped 25.17%, HDFC Bank rallied 21.29% and Satyam Computers advanced 18.23%.
On Monday, for the first time in the history of the Indian stock market, trading was halted for the full day on both the Bombay and the National Stock Exchanges after the benchmark indices on the BSE and the NSE hit two upper circuit limits due to optimism about poll results. At the time of closing, the BSE Sensex was locked at 14,273, up 2,099 points or 17.24% and the S&P CNX Nifty rose 636 points or 17.33% to 4,308 before closing for the day. Trading turnover in the cash and the F&O segments was Rs.3, 103 crore.
Meanwhile, the rupee settled at Rs.47.88 against the dollar, up 3.1% on Monday, boosted by hopes of reforms and renewed capital flows after the ruling UPA coalition won a clear election victory.
Stocks to Watch
Stocks in the infrastructure sector, banking, cement and steel may extend their rally on hopes about increased spending and policy initiatives from the government. Oil explorers may get support from higher crude oil prices.
However, IT, pharma and textile stocks could come under selling pressure after the rupee saw its sharpest single-day appreciation in 23 years on Monday.
Grasim Industries may move ahead of the announcement of its quarterly results for the March quarter. Dr. Reddy's Laboratories could be in focus after it reported a net loss of Rs. 517 crore for the year ended March.
Aditya Birla Nuvo may see some activity after the company proposed to allot 18.5 million convertible warrants to its promoters for Rs. 1,000 crore at a price of Rs.540.50 per warrant.
Indiabulls Real Estate could move on getting approval from its shareholders for a $600 million share sale to qualified institutional investors.
Apollo Tyres may see some activity after it successfully concluded the acquisition of the bankrupt Dutch company, Vredestein Banden BV, for an undisclosed amount. MRF may come under selling pressure after it has declared a lockout at its radial tyre factory in Arakonam from Sunday due to labour unrest.
KS Oil may be in focus on reports that it is raising Rs.450 crore from a clutch of investors and promoters through the issue of equity shares and convertible warrants.
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