Markets trading near day's high

Benchmark Indices reached near day highs led by rate sensitive shares on hopes of a rate cut by the central bank at its policy meet on Monday. Markets have shrugged off July IIP data which came in at 0.1%.

By 1425, Sensex was up 111 points at 17,964 and the 50-share Nifty gained 28 points at 5,418. The Sensex and the Nifty touched an intra-day high of 17,973 mark and 5,423 levels, respectively so far.

On the global front, European shares and the euro rose on Wednesday while Italian and Spanish bonds were little changed after Germany's top court gave its backing to the euro zone's new 700 billion euro European Stability Mechanism bailout fund.

German approval of the ESM was crucial to boost the euro zone's crisis fighting powers and a key requirement for the European Central Bank's new plan to buy the bonds of struggling euro members.

European shares rose to stand up 0.14 percent on the day having stood up 0.07 percent just ahead of the decision. The euro hit a new four month high of $1.29017 from $1.2845. German Bund futures fell to a session low of 139.75.

Asian markets too are trading firm with Nikkei, Strait Times, Hang Seng, Taiwan, Kospi and Shanghai gaining between 0.3-2%.

Back home, the rupee stays strong at 55.2625/2675 versus its previous close of 55.34/35. A softer-than-expected factory output number for July fails to have much impact on markets.

On the sectoral front, BSE Auto, Consumer Durable, Technology, Metal, TECk and FMCG indices have surged by nearly 1% each. However, BSE Power index has declined over 1%.

Tata Motors is the top Sensex gainer, up nearly 4% after the company said it is evaluating options for setting up a manufacturing base in Indonesia to serve the country and the ASEAN region.

In the banking and financial space, ICICI Bank, HDFC Bank and HDFC are up 0.1-1.3% each on hopes that cut in key policy rates by the central bank would boost credit growth going forward.

Software majors firmed up ahead of the two-day US Federal Reserve meet which could announce stimulus measures to boost the sagging US economy. Software majors earn most of their revenues from exports to the US. TCS and Wipro are up between 1-2% while Infosys is trading with marginal gains.

Metal stocks like Tata Steel and Coal India are up over 2%.

Other notable gainers include L&T, HUL, ITC, RIL and Tata Power.

On the losing side, shares of power generation companies are under pressure after the Indices of Industrial Production (IIP) of electricity sector reported 2.8% growth in July 2012 compared to 13.1% a year earlier. The sector had recorded 8.8% growth in June 2012.

Among the individual stocks Siemens, Crompton Greaves, Bharat Heavy Electrical Limited, Reliance Infrastructure and JSW Energy have fallen more than 2% each, while Adani Power, Torrent Power, NTPC and Reliance Power are down by 1-2% on the Bombay Stock Exchange (BSE).

Other losers include Cipla, Hero Moto, GAIL, JSPL, Hindalco, M&M and Bharti Airtel.

The broader indices are trading marginally higher – BSE Midcap and Smallcap indices are up 0.3% each.

The market breadth remains positive with 1,405 advancing and 1,317 shares declining.