Selling pressure has abated; we may witness a short rally

The market was up on strong global equities and gains in L&T and ONGC stocks. The Sensex ended at 16,875, higher by 40 points (0.2%) while the Nifty settled at 5,066, higher by 6 points (0.1%). The indices were down at the morning session on weak Asian markets with the Sensex touching an intraday low of 16,744. A strong recovery started from the mid-morning session, taking a cue from the rally in European markets. The benchmarks pared most of their gains in the afternoon session.

Asian stocks were up with a recovery in the Chinese market on Tuesday. Key benchmark indices in China, Japan, Singapore, Hong Kong and Indonesia were up by 0.07% to 1.36%. On the other hand, indices in South Korea and Taiwan fell by 0.18% to 0.5%.

US stocks rebounded in late trading on Monday as bargain-hunting propped up indices, setting aside concerns that efforts to tackle the eurozone debt crisis could cripple the global economy. The Dow edged up 5.6 points (0.05%) to end at 10,626. The S&P 500 added 1.2 points (0.1%) to close at 1,137. The Nasdaq rose 7.3 points (0.3%) to close at 2,354.23.

The Europe Commission threatened action on debt speculators and Greek prime minister suggested a ban on such activities. In October, the European Commission, the EU's executive body, will draft new rules for buying and selling of credit default swaps, part of the largely unchartered $600-trillion derivatives market that ballooned ahead of the global financial crisis. The International Monetary Fund (IMF) said that the global economy needs policy support and risk exists in the system, which is clear from the Greece debt crisis. The Asian Development Bank (ADB) said that strong growth outlook and prospects for better returns will increase capital inflow in the region, however, it will also increase appreciation pressure on the currencies.

Back home, the Indian Meteorological Department (IMD) said that arrival of the monsoon is not likely to be affected due to the cyclone in the Bay of Bengal. A depression in the Bay of Bengal is intensifying and India had issued a cyclone alert at ports in the eastern parts of the country on Monday.

Foreign Institutional Investors (FIIs) were net sellers of Rs1,224 crore. Domestic Institutional Investors (DIIs) were net buyers of Rs381 crore. The rupee was up on the strong equity market. However, the euro debt crisis limited its gains. 

Shree Renuka Sugars (up 3.8%) is renegotiating the price of its proposed Rs1,530-crore acquisition of Brazilian sugar and ethanol maker Equipav amidst differences over the amount of debt on the Brazilian company's books. DLF (up 0.8%) will sell its stake in ultra-luxury hotel group Aman Resorts as part of a planned exit from the hospitality business. Axis Bank (down 0.5%) has received bids from six suitors for its private equity arm. IL&FS Investment Managers, Aditya Birla Private Equity, Shapoorji Pallonji Group and US-based Darby Private Equity are among those that have shown interest in buying Axis Private Equity.

NTPC (0.3%) plans to float a $4.2-billion tender to procure high-end power equipment on the condition that they are made in India. The tender will be for around eight units of 800MW. Godrej Consumer Products (GCPL) (up 1.1%) has completed acquisition of Indonesian household insecticides maker Megasari Makmur Group and its distribution company for an undisclosed sum. The Indonesian firm manufactures and distributes household products, including household insecticides, wet tissues and air-fresheners. 

Shriram EPC (up 1.8%) has received two orders. One of the two orders, valued at Rs49 crore, is from Prakash Industries to set up a coal-handling plant at its Champa power plant in Chhattisgarh. The other order, worth Rs76 crore, is from Bangalore Water Supply and Sewerage Board for providing sewerage systems.