A strong rally on higher volumes breaks the sideways movement of two months, but there are strong headwinds

Contrary to our expectation, the market was not soft today. Rather, we had a massive rally. The four-day rally and extremely firm close changes the picture from a range-bound market to an uptrending market with a promise of further gains. Nifty will now target 5,800 and Sensex will target 19,400. However, there are tremendous headwinds and the market will not run away at this stage. Any entry into the market and specific stocks must be on dips and not on rises.

The market opened the day on a positive note, tracking the firm Asian markets and on institutional support. The Sensex opened 130 points higher at 18,481 and the Nifty was at 5,589, up 67 points from the previous close. IT, realty, banking and metal stocks supported early gains. The indices pared some gains to touch their intra-day lows a little before 10am. At the day's low, the Sensex was back at 18,481 and the Nifty retraced to 5,561.

The market was range-bound till around 12.20pm, after which brisk buying pushed the indices further northwards. However, the broader indices were a bit slow in catching up with the Sensex and were left behind. The market touched the day's high in the last half hour, with the Sensex at 18,858 and the Nifty at 5,667.

The market closed a tad below those levels-the Sensex closed with gains of 465 points at 18,816 and the Nifty closed at 5,654, up 132 points. The closing was the best since 27 January 2011. The advance-decline ratio on the National Stock Exchange was good at 924:476.

The three-day budget rally (28th February to 3rd March) added 789 points on the Sensex and 233 points on the Nifty, whereas the current four-day rally (22nd March to 25th March) has put on 977 points and 289 points, respectively.

While the market closed with splendid gains, investors are advised to take a cautious approach as a firm direction is yet to come.

The BSE Mid-cap index closed 1% higher and the BSE Small-cap index was up 1.02%.

The BSE IT index (up 4.02%) was the top sectoral gainer. Other major gainers were BSE TECk (up 3.49%), BSE Bankex, BSE Realty (up 2.72% each) and BSE Capital Goods (up 2.23%). There were no losers in the sectoral space.

All 30 stocks in the Sensex ended higher today. DLF (up 6.17%), Infosys (up 5.23%), NTPC (up 3.82%), Wipro (up 3.68%) and Tata Power (up 3.67%) were the best performers in the index.

The telecom ministry said today that it will decide in a month's time on the cancellation of licences given by former telecom minister A Raja to firms that were allegedly ineligible. Mr Raja faces charges of issuing 122 licences in 2008 without auctioning the scarce resource spectrum, which caused a presumptive loss of over Rs1.76 lakh crore. The matter is being examined by various investigating agencies as well as a parliamentary panel.

The Asian markets, with the exception of the Jakarta Composite, witnessed a good performance today with most of them clocking gains of over 1%. The markets focused on economic growth and ignored the worries plaguing the world. Optimism ahead of the earnings season also supported investor sentiments.

The Shanghai Composite closed 1.07% higher, the Hang Seng surged 1.06%, the KLSE Composite added 0.11%, the Nikkei 225 surged 1.07%, the Straits Times climbed 0.91%, the Seoul Composite gained 0.85% and the Taiwan Weighted rose 0.40%. On the other hand, the Jakarta Composite fell by 0.13%.

Back home, institutional investors-both foreign and domestic-were net buyers in the equities segment on Thursday. Inflows by foreign institutional investors were Rs307.82 crore while domestic institutional investors pumped in Rs378.12 crore.

Pharma major Shasun Pharmaceuticals (down 0.85%) has estimated a loss of Rs50 crore from the closure of its Cuddalore plant due to a chemical leak two weeks ago. With the Inspector of Factories giving its clearance, the plant, which makes anti-ulcerant drugs such as Ranitidine, Nizatidine and Gabapentin, expects to start operations shortly.

Telecom services provider Bharti Airtel (up 1.86%) stated that it has no immediate plans for an initial public offering of its telecom tower unit, Bharti Infratel. The telecom major is also not looking at listing its joint venture, Indus Towers.

Bharti Infratel has more than 30,000 towers across 18 states, and 11 telecom circles. It also has a 42% stake in Indus Towers which was created as a joint venture between Bharti Infratel, Vodafone and Idea, which is the world's top telecoms tower company with more than 100,000 towers.

Uflex (up 2.31%) is in the process of starting a PET film plant in Kentucky in the US. The plant is expected to be fully operational by December 2012 and will contribute $20-22 million per annum to the company's EBITDA. Uflex will invest $80-$85 million in the plant, which will be financed by a mix of debt as well as internal accruals, the company said.