Flat opening likely

It is better to know some of the questions than all of the answers.

Can the bulls sustain the current tempo? That is the big question worrying most players at the moment after the recent spurt. While the main indices could advance a little more in the near term, investors are still skeptical about a sustained turnaround. That is because considerable amount of headwinds still persist, both on the local as well as global front. The US, Europe and Japan are most probably already in recession, and though the credit crunch has eased substantially, it will be a while before the global economy is back on track.

India too remains vulnerable to a sharp slowdown despite the slew of measures unleashed by the Government and the RBI to arrest the slide. Not just FY09, a few economists see continued pain for the Indian economy in the coming fiscal year as well. India Inc. is now suffering from contraction in demand and difficulties in funding capex despite the RBI's liquidity-boosting steps. Among the positive events are the correction in commodity prices and a possible reversal of the interest rate cycle. The captains of Indian Industry are hoping for some more measures from the Government and the RBI, to help revive economic growth. While that may happen, the global downturn will continue to pinch in some ways or the other.

There is also a question mark over the sustainability of the recent FII buying, notwithstanding some revival in the global risk appetite. Today, we expect the market to open on a flat to slightly higher note. There could be some softening at higher levels after the recent rally, as most Asian stock benchmarks (barring the Nikkei), are down sharply. The main US stock indices too ended almost unchanged overnight ahead of the Presidential Election on Nov. 4. European shares rose for a fifth consecutive session.

FIIs were net buyers of Rs3.6bn (provisional) in the cash segment on Monday while the local institutions pulled out Rs970mn. In the F&O segment, the foreign funds were net buyers at Rs13.2bn. On Friday, FIIs were net buyers of Rs11.83bn in the cash segment.

US stocks closed nearly flat on Monday, as automakers reported dismal monthly sales and a report showed that US manufacturing activity dropped sharply in October. Investors were cautious as the race for the White House neared the finish line.

After marginal moves in either direction Monday, the Dow Jones Industrial Average fell by just 5 points to end at 9,319.83, with 16 of its 30 components posting losses. The S&P 500 Index shed 2 points to 966.31, while the Nasdaq Composite index added 5 points to 1,726.33.

Market breadth was positive. But, volume was pretty thin, narrowly topping one billion on the New York Stock Exchange, with advancing stocks outpacing declining issues roughly 9 to 7.

On the eve of Election Day, Democratic presidential candidate Barack Obama and Republican rival John McCain are making final appearances around the country, with polls consistently showing Obama ahead in the campaign for the White House.

Pacing gains among the S&P's 10 industry groups were telecommunications shares. Retail shares were mixed ahead of sales reports due later in the week. Energy shares proved the biggest laggards.

Lending rates continued to improve amid efforts of US and world governments to get money flowing again. Treasury prices rose, lowering the corresponding yields. Oil prices slipped and the dollar gained versus other major currencies.

Meanwhile, slumping manufacturing and construction activity, and plunging auto sales, added to bets that a recession is already underway. In the afternoon, Dallas Federal Reserve Bank President Richard Fisher forecast that there will be no economic growth through 2009.

Additionally, in the afternoon, the government said it will borrow a record $550bn in the fourth quarter and another $368bn in the first quarter of next year as it looks to fund the massive financial rescue plans recently put in place.

A huge drop in October auto sales left the industry on track to post the worst monthly results in 25 years. GM reported a 45% decline in October sales, versus a year ago. Ford reported October sales plunged 30% versus a year ago.

The dollar fell against the euro and gained against the yen. COMEX gold for January delivery climbed $8.60 to settle at $727.50 an ounce. Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.91% from 3.96% late on Friday.

US light crude oil for December delivery fell $3.90 to settle at $63.91 a barrel on the New York Mercantile Exchange. Gasoline prices fell another 2.1 cents overnight, to a national average of $2.415 a gallon.

Investors were playing it cautious ahead of Election Day. Analysts say investors will be glad to have the election over and to know that a change in administration is coming, regardless of whether Republican John McCain or Democrat Barack Obama wins.

Although Wall Street would seem to prefer business-friendly Republicans, studies have shown that stocks tend to do better under Democratic presidents than Republicans and best during times of gridlock, when one party controls the White House and another the Congress.

Across the Atlantic, European shares rose for a fifth consecutive session, as investors continued to welcome central banks' efforts to shore up sentiment.

The pan-European Dow Jones Stoxx 600 index rose 0.6% to 223.38. The French CAC-40 added 1.2% to 3,527.97, while Germany's DAX 30 advanced 0.8% to 5,026.84 and the UK's FTSE 100 closed up 1.5% at 4,443.28.

Bulls started off November with a bang led by a rally in banking, realty and capital goods stocks. Further on, firm cues from the international equity markets coupled with the PM's assurance on growth initiatives also added to market sentiment.

The upswing propelled the BSE benchmark Sensex above 10K levels to close at 10,337. While, the NSE Nifty index surged past the 3,000 mark adding 158 points to finally end at 3,043 levels.

IDFC rallied by over 12% to Rs65 after reports stated that the company was in talks with GE Commercial Finance, to acquire about 35% stake in the latter's construction equipment finance business in India. The scrip touched an intra-day high of Rs67 and a low of Rs60 and recorded volumes of over 61,00,000 shares on BSE.

PTC India surged by over 7% to Rs56 after reports stated that the company was looking at picking up stakes in power generation projects across the country. The scrip touched an intra-day high of Rs57 and a low of Rs54 and recorded volumes of over 5,00,000 shares on BSE.

BEL advanced by 6% to Rs641 following reports that the company plans to set up its third central research laboratory at Hyderabad, which will focus on research in emerging technologies in the fields of opto-electronics and electronic warfare. The scrip touched an intra-day high of Rs645 and a low of Rs622 and recorded volumes of over 7,000 shares on BSE.

Tata Chemicals gained by 5% to Rs166 after the company reported results for the second quarter ended 30 September, 2008.

The revenue stood at Rs466.1mn with an increase of 169% yoy. The profit before tax has increased by 120% at Rs58.7mn. The scrip touched an intra-day high of Rs169 and a low of Rs161 and recorded volumes of over 3,00,000 shares on BSE.

Shares of Jyoti Ltd surged by over 3% to Rs35 after reports stated that the company has entered into technology tie-ups with German and Dutch companies for its windmill project. The scrip touched an intra-day high of Rs38 and a low of Rs32 and recorded volumes of over 11,000 shares on BSE.

Apollo Tyres advanced by over 2% to Rs24 after reports stated that the company would begin its operations in Europe by opening its first sales, marketing and technical office in Germany in January. The scrip touched an intra-day high of Rs25.2 and a low of Rs23.9 and recorded volumes of over 3,00,000 shares on BSE.

Zylog Systems gained by 5% to Rs115 after reports stated that it would spend US$17.5mn for acquiring three overseas companies. The scrip touched an intra-day high of Rs118 and a low of Rs112 and recorded volumes of over 68,000 shares on BSE.

Zee News gained by 2.5% to Rs38.7 after the company announced that it acquired 26% stake in Sky B, West Bengal, stated reports. The scrip touched an intra-day high of Rs40 and a low of Rs37 and recorded volumes of over 2,00,000 shares on BSE.

Looking at Monday's rally, bulls might extend the gains atleast in the early trades. The fall in inflation and drop in crude prices may augur well for the time being but we still have to get some confidence. For the time being, avoid some fresh buying at higher levels in large quantities as we are yet to get clarity on the economy.