Sensex up 299 pts ahead of Fed meet; banks, metals shine

“While we are structural bulls on India with an index target of 54,000 by end-2018, we have been highlighting that we see the market being range-bound to negative over next few months,” said Bank of America Merrill Lynch in its note today.

According to the brokerage, the pace of economic recovery as well as earnings recovery will disappoint investors near term.

Meanwhile, all eyes are on the Fed's statement from the FOMC meet (that will begin tonight) and investors hope that the central bank will give a clearer signal on the timing of its first interest rate hike in almost a decade. Many investors expect a change in the Fed's language, and most economists expect Fed Chair to erase the word 'patient' as a precursor to starting rate hikes in June.

Hans Goetti of Banque Internationale is of the view that Fed will drop the word 'patient' but the rate hikes will start only by June because the economic data in US is not yet encouraging.

On the global front, Asian markets like Nikkei, Kospi and Shanghai rallied 1-2 percent. European markets were mixed; France’s CAC and Germany’s DAX lost 0.4-1 percent while Britain’s FTSE gained 0.2 percent (at 16 hours IST).

Back home, banking & financials, capital goods, auto, metals and healthcare stocks led the market higher.

Shares of HDFC, Tata Motors, Larsen & Toubro, Reliance Industries, ITC and Axis Bank were top contributors to Sensex’s gains, up 1-2.6 percent.

Dr Reddy’s Labs surged 3.7 percent as Citi said the company has responded to USFDA observations at the Srikakulam plant but haven't heard from the US authority as yet. Citi reiterated that the issues are unlikely to be materially disruptive.

In the metal space, Hindalco Industries spiked 5.75 percent and Sesa Sterlite gained 4 percent. Tata Steel was up 2 percent.

However, Jindal Steel fell 8.5 percent as media reports indicated that the government is expected to reject two bids from JSPL for Gare Palma and Tara coal blocks, citing very low bids and talks of cartelisation. JSPL’s power plant will be hit badly if the report is correct.

Infosys, Wipro, Bharti Airtel, Coal India, Tata Power and GAIL were under pressure, down 0.4-1 percent.

The broader markets underperformed benchmarks; the BSE Midcap and Smallcap indices gained 0.6 percent and 0.2 percent, respectively. About 1376 shares advanced while 1442 shares declined on the Bombay Stock Exchange.

Amtek Auto gained 2.7 percent on buying German-based Scholz via Singapore subsidiary. Scholz is a hot die forgings manufacturer. Cadila Healthcare surged 7 percent on launching hepatitis C therapy SoviHep in alliance with Gilead.

Suzlon Energy rose 2 percent after brokerage house HDFC Securities initiated coverage with a buy and target price of Rs 34 apiece. The brokerage believes Suzlon is on the cusp of a turnaround.

Hitachi Home and Siemens advanced 1-2 percent after signing memorandum of understanding with Confederation of Indian Industry for Smart City initiative.

KPIT Technologies tanked 6 percent as the management updated its Q4FY15 dollar revenue guidance. It expects revenue to be flat sequentially due to cross currency, and the FY15 guidance to be met in constant currency not in dollar terms. Company only sees marginal growth in PAT in FY15 compared to FY14.