SENSEX ROCKETS 567 PTS ON FED QE REJECTION, ANNA TRUCE D-St Gets a Stimulus on Bernanke’s No

Stock markets got a shot in the arm on Monday as traders cut bearish bets after the US Fed refrained from announcing another stimulus and political uncertainty abated with activist Anna Hazare ending his fast. Investors were relieved that America's central bank had stopped short of launching a third bond-buying programme, known as quantitative easing (QE), as it could have increased the flow of money into commodities and emerging markets, including India, stoking inflation. 

Key indices rose 3.6% on Monday, the highest intra-day per cent rise since May 2009, mirroring gains in Asia and Europe. The Sensex gained 567.50 points, or 3.58%, to 16416.33. The Nifty rose 171.80 points, or 3.62%, to 4919.60. "Investors cut part of their short positions because the Fed refrained from doing QE3," said Sandip Sabharwal, CEO (portfolio management services), Prabhudas Lilladher. "A big uncertainty for the market has ended with the end of Hazare's fast." 
The RBI on Monday unveiled the muchawaited draft norms on new banking licences that will allow corporates to set up banks. Shares of non-banking finance companies jumped after the announcement. Short-term Outlook Bearish 
The broader market reflected the strength in the indices, with gainers outnumbering losers 2121:716 on the BSE. Foreign investors net bought .366.19 crore of shares on Monday after selling stocks worth .11,500 crore in August till Friday. But a resurgent Dalal Street could soon face challenges. Some are worried about the government's prolonged stand-off with Hazare and the possibility of more tussles ahead as a parliamentary committee considers various versions of the Lokpal Bill. Investors are also closely watching the gross domestic product (GDP) estimates for the second quarter, to be released on Tuesday, which will reflect the impact of higher interest rates on India's economic growth. GDP growth is expected to moderate to 7.6% in the June quarter, the slowest in six quarters. 
"Non-agricultural growth is likely to soften, reflecting macro headwinds — high inflation and interest rates, in particular," said Barclays Capital in a note. A lowerthan-expected GDP reading is likely to spark hopes that the RBI could halt its monetary tightening spree. But that may not stop investors and traders from selling on Tuesday, ahead of the market holidays on Wednesday and Thursday, on worries that adverse events in the US and Europe on these two days could catch them on the wrong foot. The short-term outlook for equities is neutral to bearish due to global concerns such as European sovereign crises, higher crude oil prices and slow US economic recovery, according to a survey of 23 fund managers conducted by ICICI Securities. So far in 2011, the main indices have fallen 20%, while the BSE's smallcap index has tanked 27% on worries higher borrowing costs could squeeze corporate profits and drag down valuations. A 20% fall in key indices is broadly accepted as a bear market. 
"Earnings expectation has been revised downwards in the past three months from 15-20% to 10-15% for FY12 as well as FY13. Of the fund managers, 30% believe earnings will be less than 10% for FY12, which reflects a cautious mood," the ICICI Securities report said.