The Indian market may climb to a fresh 33-month high on Wednesday, tracking strong Wall Street cues after Japan's surprising move to lower interest rates raised speculation that the U.S. FOMC may also undertake additional easing methods.
Asian stocks are rising this morning, lifting the MSCI Asia Pacific index up to an almost 6-month high, cheered by gains on Wall Street and in Europe on expectations the Fed would announce further quantitative easing to help safeguard a fragile recovery.
With investors worried about further monetary easing, the dollar is now trading weak at an 8-month low against the euro, while the Dow futures are rising 11 points.
Closer home, though there are some concerns on the valuation front, Indian equities aren't in bubble territory yet. Earlier this week, finance minister Pranab Mukherjee said that the government was watching the inflow of funds and ruled out any control on overseas fund flows for now.
On Tuesday, FIIs bought shares worth Rs.671.12 crore on a net basis, while domestic institutional investors sold shares worth Rs.802.95 crore, provisional data shows. On Monday, net purchases by FIIs totaled Rs.1,918.90 crore while domestic funds were net sellers of Rs.352.60 crore, according to data released by market regulator SEBI.
Net inflows from overseas investors for the current year thus far crossed the magic figure of $20 billion on Tuesday, the highest ever so far.
On Wall Street, stocks ended with strong gains on Tuesday, as the prospects of the U.S. Federal Reserve bringing back its quantitative easing measures appeared increasingly likely following Japan's own move to do so. A stronger than expected reading on U.S. service sector activity also helped to drive the major averages to multi-month closing highs.
The Dow advanced 1.8%, the Nasdaq rallied 2.36% and the S&P 500 climbed 2.09%. Barring Mahindra Satyam which ended down over 3%, the Indian ADRs also closed on a positive note. Among the top gainers, Wipro, HDFC Bank and MTNL rose by 2%-3%.
Crude oil prices rose on Tuesday, supported by expectations the U.S. dollar will further weaken. Light, sweet crude for November delivery rose $1.35 to $82.65 a barrel on the New York Mercantile Exchange.
Back home, continued profit taking amid mixed Asian cues and a slightly disappointing report on India's service sector activity for September weighed on the Indian stock market Tuesday.
The benchmark 30-share Sensex ended down 68 points or 0.33% at 20,408, with 18 of its components ending in the red and the broader Nifty fell by 14 points or 0.22% to 6,146. However, the broader market witnessed significant activity ahead of the earnings season, with the BSE mid-cap and small-cap indexes up 0.78% and 1.14%, respectively.
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