Firm trade continues, Sensex up 260 pts

Markets advanced over 1% in afternoon trades led by buying in IT shares ahead of the Infosys results which will kick start the earnings season on Wednesday this week. The Nifty added 71 points, at 4,959 and the Sensex advanced 259 points, at 16,486.

Earlier in the day, the markets opened on a subdued note tracking lacklustre cues from Asia despite progress in Europe to tackle the debt crisis. The Nifty inched up in the mid-morning session and touched a high of 4,962 following positive opening in Europe.

In Asia, China's Shanghai Composite ended down 0.6% and Hong Kong's Hang Seng index closed flat, at 17,711. European markets were trading mostly higher following gains in banking shares. The FTSE 100 added 0.4%, CAC 40 was up 0.1% and the DAX was trading flat.

Back in India, the analysts said that market momentum was good and Nifty may scale to 5,000 levels. Nandish Patel, Derivative Analyst from Sharekhan said, “The momentum will continue and market may test 5,000-5,050 in the coming days.”

Going forward markets will take cues from the IIP (Industrial Production) data for the August on Wednesday, the WPI (Wholesale Price Index) for September on Friday and the second quarter results which kick starts with Infosys numbers on Wednesday this week.

Economists expect IIP at around 5.5% y-o-y for August against 3.3% reported for July.

Analysts expect India Inc. to report the worst quarterly results in two years as rising interest rates and high inflation will dent profitability. Prabhudas Lilladher in the earnings preview said, "Profit after tax of Nifty 50 companies (excluding oil & gas) continues on downward trajectory and is expected to post anemic 6.8% growth y-o-y." Prabhudas Lilladher expects revenue growth at 15.5% y-o-y and Ebitda margins (ex-BFSI) to decline by 149 bps y-o-y.

Back in India, Tata Motors wasthe top gainer on the Sensex, up 6% followed by Tata Power and DLF, up between 3-4% each. Maruti Suzuki was the prominent loser, down 3% after reports that the company dismissed 10 workers who went on strike. Sun Pharma and Larsen-and-Tourbo were other losers, down over 1% each.

Technology shares were leading the gains; the index is up almost 2%. Infosys that commences the results season on October 12th is expected to maintain the dollar revenue growth at 18-20% y-o-y and the EPS guidance will be revised to Rs 130-132 on the back of rupee depreciation, analysts say. Infosys advanced 3%, while Wipro and TCS were up 2% each.

The market breadth was positive, as 1594 stocks have advanced for 1035 declining stocks.