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Major headlines:

·         Higher debt limits room to cut fiscal deficit.

·         NPPA slashes prices of 33 essential medicines

·         Infrastucture sector may get a rise in budget allocation

Indian Indices: Asian indices opened flat after 2 days of huge rallies as the Japanese index hit new 52 week highs along with the Dow Jones index which easily topped 20000. The return of 'risk on' trade is seeing rise in US bond yields which is seeing money chase equities for higher return. Gold prices after a sharp rally saw un winding as defensive assets took a back seat, while oil consolidated after seeing a sharp upswing in the last week.

Nifty will test fresh 3 month highs as the markets open after a holiday on Thursday. The sharp move in the Nifty on expiry days caught most by surprise with 'bears being squeezed' as the Nifty closed above 8600.With foreign investors also joining the bull market expect any decline to be used as buying opportunity as money on the sideline would re enter. For today expect the broader mid cap stocks to outperform as risk returns with investors betting on the mid & small cap stocks.

The BSE Sensex is currently trading at 27955.18, up by 247.04 points or 0.89% after trading in a range of 27759.48 and 27959.38. There were 21 stocks advancing against 9 stocks declining on the index. The broader indices were trading in green; the BSE Mid cap index was up by 1.12%, while Small cap index was up by 0.94%.

Technical view: Nifty easily closed above most resistances with 8570 now being the strong support & resistance now coming close to 8720. Bank Nifty also finds support @19260 while resistance now comes @ 19740.

Market Sentiment:

The market breadth on BSE was positive in the ratio of 1487:730, while 149 scrips remained unchanged.

Trading ideas: BANKBARODA (Buy above Rs 162 for target of Rs 170, SL at Rs 158.5): Stock has been consolidating in a trading band of Rs 153-160 from past ten trading sessions. Multiple attempts to close above Rs 160 went futile, as stock reversed direction from Rs 159-160 zone. On daily charts, stock not only managed to give a close above the crucial resistance of Rs 160, but also closed above all the major averages (100-200 DMA). We advise to Buy BANKBARODA above Rs 162, stop loss at Rs 158.5 and Target of Rs 170.

Rollover Analysis: Nifty has posted highest gains (eoe) since March 2016. For this series, Nifty Bank index outperformed Nifty Index by 1.88% after the lackluster December series. Call option writers were among the biggest loser's as the call base kept on shifting from 8200 to 8600. A huge short covering in 8500CE strike helped Nifty regain 8600 level for the first time since 01 Nov.2016. Long gamma positions were the flavor of the series.

FII's continued its selling spree in the Cash segment for the January series while forming long positions in Index Futures. Long/Short ratio of Index Futures was above 2x for almost entire series. Rollovers of Nifty/Banknifty stood at 73%/61% (1.91cr/20 lakh shares) as against 69%/68% (1.68c/19 lakh shares) previous expiry. Rollover is higher for both Nifty and Banknifty in terms of Open Interest and with rising cost of carry, a positive start to the new series can be expected. On the options front, February series has maximum calls base at 9000 strike (3.6mn shares) and maximum put base at 8400 strike (3.2mn shares) indicating a trading range ceiling and floor at the start of the month.

Nifty Movers: The top gainers on Nifty were BHEL up by 3.90%, Bank of Baroda up by 3.03%, Axis Bank up by 2.98%, Eicher Motors up by 2.45% and ICICI Bank up by 2.40%.

On the flip side, Bosch down by 1.39%, Wipro down by 1.38%, Kotak Mahindra Bank down by 1.02%, Lupin down by 0.97% and Cipla down by 0.82% were the top losers.

Top Sectoral& Stock Screening: The top gaining sectoral indices on the BSE were Oil & Gas up by 1.39%, PSU up by 1.38%, Capital Goods up by 1.28%, Bankex up by 1.27% and Consumer Durables up by 1.20%, while there were no losers.

The top gainers on the Sensex were Axis Bank up by 2.87%, ICICI Bank up by 2.48%, HDFC up by 2.12%, GAIL India up by 2.11% and Maruti Suzuki up by 2.03%.

On the global front: On the global front, Asian shares were mostly trading in red, with several markets shut. Japan reported national core CPI rose 0.2% year-on-year in December, below the expected 0.3% pace. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,650 and 27,900 levels respectively.

Global Signals: The Asian markets were trading mostly in red; Hang Seng decreased 13.39 points or 0.06% to 23,360.78, FTSE Bursa Malaysia KLCI decreased 5.86 points or 0.35% to 1,686.36 and Jakarta Composite decreased 5.17 points or 0.1% to 5,312.47.On the other hand, Nikkei 225 increased 30.04 points or 0.15% to 19,432.43.

South Korean markets are closed for holidays on Friday and Monday. Chinese markets are shut for the Lunar New Year holiday and will resume trade on Friday, February 3. Taiwan is also closed for Lunar New Year and will reopen on Thursday, February 2.