Sensex at 18K

Indian equity continued their upside for the second consecutive day - the Nifty was inching up towards the 5400 level at 10:43 hours as global markets were on uptrend on stablility in Egypt after President Muhammad Hosni Sayyid Mubarak resigned on Friday. He handed over control of the country to the military after headed country for 30-years as a president.

About 10 shares gained as compared to one share declined on NSE Nifty 50. Financial, metal, capital goods, auto and power companies' shares were leading the markets higher. However, heavyweight Reliance Industries on sellers' radar today with nearly one percent fall as there were reports that the company may have to pay fine for insider trading.

Rakesh Arora of Macquarie Capital Securities is bullish on Indian markets. He said that the Sensex is likely to touch 22,000 by the year-end.

Arora explained that there is a renewed interest as the Indian growth story looks largely unparallel in the world. “Talking to the investors, it does appear that they are looking for buy ideas. I would say that we had a short and sharp correction and maybe the investors will come back at these levels, he added.

The 30-share BSE Sensex was trading at 18,001, up 282 points and the 50-share NSE Nifty surged 88 points to 5,397. The broader indices were outperforming the benchmarks - the BSE Midcap and Smallcap indices rallied 2.5-3%.

You Should Know Before The Opening Bell

In the US markets, stocks ended mixed with the Dow ending its winning streak, closing fractionally lower after rising for eight straight sessions as hopes for a possible resolution to the political unrest in Egypt lifted equities off their intraday lows. For the most part, risk-sensitive asset markets held up.

In economic data

10 things you should know before the opening bell

* New claims for jobless benefits fell to their lowest level in 2.5 years down 36,000 to settle  at a seasonally adjusted 383,000.
* Wholesale inventories climbed 1% to their highest level in almost two years while sales rose much less than expected.
* Business inventories rose to USD 430.5 billion, the highest since January 2009.
* Foreclosures continued their upward climb in January surging 12%.
* The US treasury monthly budget report showed a January deficit of USD 49.8 billion versus $80.0 billion last month.

And in the day's economic data to watch out for:

* The US international trade gap in January is expected to rise to USD 40.5 b from USD 38.3
* The University of Michigan’s consumer sentiment index is expected to rise to 75.0 versus 74.2

European shares fell on Thursday, hit by some disppointing results from index heavyweights like Credit Suisse and by renewed sovereign debt concerns after Portugal's government bond spreads widened.

The US dollar fell to a 3-day low against the euro on Wednesday, after a strong treasury debt sale accelerated bearish sentiment in the wake of comments by Federal Reserve chairman Ben Bernanke that its bond buying program would continue.

Oil rose after Egyptian president Mubarak defied calls for his resignation, agreeing only to delegate some authority to his deputy, prompting concern supplies may be disrupted amid further unrest.

Gold fell to USD 1,363 an ounce as the precious metal remained under pressure from the firmer dollar and sharper risk appetite.

And back home, markets closed the session lower for the third consecutive day amid an extremely choppy trade yesterday led by banking and telecom heavyweights. The Nifty touched the 5200-mark during the day for the first time in eight months to end at 5,226 after trading in a tight range of 5210-5250 all day.

An important cue for the markets today will be the IIP data—CNBC-TV18 poll throws up a weak 1.69% versus the 2.7% in November and hugely down from the double digit growth until October.

The Cairn India top management in an analyst call last evening made it very clear that its board is not in a position to accept any of the pre-conditions laid down by the oil ministry for approving the deal with Vedanta.

Even Vedanta had earlier communicated to the oil ministry that it could not accept these pre-conditions as it would be against the interests of Cairn India shareholders, especially minority shareholders. Cairn India’s top boss Rahul Dhir in this concall clarified that though the company has nothing in writing from the government on these conditions. The board cannot concede to ONGC's claim that royalty at the Barmer oil fields is cost recoverable.

The follow on offer for SAIL, which was scheduled for February has now been pushed to March. CNBC-TV18 learns that this delay could be due to some issue with the bankers.

Private Banks, ADAG, Auto up

The Nifty was trading in a tight range around 5250 level at 14:24 hours, though it trimmed some losses and recovered more than 70 points from day's low of 5,197, led by private banks, Anil Dhirubhai Ambani Group, auto, power and select healthcare companies' shares. Short covering could be the reason behind this recovery as traders might have felt that the markets were oversold.

However, the consistent selling in heavyweights like Reliance Industries, SBI, BHEL, Bharti Airtel, Infosys, TCS, HDFC, Wipro and HUL was putting pressure - down 2-3%. Metal companies' shares too were down barring SAIL with 6% gain.

We cannot ignore that a visitation of 4,900 levels looks very likely, says Rajesh Jain, independent market strategist. He said, however, "I hold the view that this is a good time to pick up that initial 20% of the stocks of your portfolio and perhaps, continue to accumulate them."

The 30-share BSE Sensex was trading at 17,500, down 92 points and the 50-share NSE Nifty fell just 12 points to 5,241. The broader indices too were showing recovery - the BSE Midcap Index was down just 0.3% and Smallcap down 1%.

ICICI Bank and Axis Bank from financial space gained 1-1.5%; IDFC rallied 3% and HDFC Bank was up 0.4%. DLF from realty space bounced back with 2% gain.

ADAG stocks like Reliance Communications, Reliance Power and Reliance Capital were up 1-3%. Reliance Infrastructure was the biggest gainer with 10% rise as the company will consider share buyback on February 14.

Tata Motors from auto pack gained more than 2% followed by Maruti, Hero Honda, Bajaj Auto and M&M with 0.5-1.3% rise. Heavyweights L&T and ITC rallied 1-2%.

New listing - Omkar Special was trading at Rs 56.60, down 42.24% as compared to issue price of Rs 98 a share.

Infrastructure was the most beaten down sector since Tuesday, which showed bounced back today. Lanco Infratech surged 22% and GMR Infra gained 12%.

Global stocks, dollar fall

Global stocks slipped and the dollar fell on Wednesday as investors worried about the run-up in equity markets this year and US Federal Reserve Chairman Ben Bernanke said US unemployment remained too high.

US crude prices retreated as official data showed increases in U.S. oil inventories, while prices for Brent crude in London topped $100 a barrel, supported by unrest in Egypt.

US government debt prices rose as bargain hunters emerged as anxiety over the U.S. central bank's inflation-fighting pace pushed benchmark yields to nine-and-a-half month highs.

Bernanke told the a US House panel that a 9% unemployment rate was too high and the rate of inflation too low for the Fed to budge from its super-loose policy stand, while acknowledging recent economic improvement.

The euro broke above a key USD 1.3700 level versus the dollar on Bernanke's testimony before the US House of Representatives Budget Committee that largely echoed a speech he delivered last week.

Wall Street edged lower as investors booked profits after stocks hit new two-and-a-half-year highs Tuesday, but strong earnings made it likely the market would continue an upward trend.

Global stocks, as measured by MSCI's all-country world index are up more than 4% so far this year and the S&P 500, a US benchmark, has gained more than 5% since the beginning of 2011.

"The primary trend (in the market) is that we are moving up on solid earnings, and a little bit of profit-taking on a small volume only means new bids are coming up," said Joseph Greco, managing director at Meridian Equity Partners in New York.

Shares of Dow components Coca Cola Co and Walt Disney Co jumped after both reported strong results, helping the index outperform the broad market.

The Dow Jones industrial average was down 21.42 points, or 0.18 percent, at 12,211.73. The Standard & Poor's 500 Index dipped 6.88 points, or 0.52%, at 1,317.69. The Nasdaq Composite Index fell 11.03 points, or 0.39%, at 2,786.02.

European shares were off, further retreating from 29-month highs hit earlier this week, weighed down by mining shares on concerns over demand after top consumer China raised interest rates to fight inflation.

"Our view is that gently, not aggressively, we are not mega bearish, take money off the table. We are looking to buy the market at a lower level," said Philip Lawlor, investment strategist at Smith & Williamson in London.

A rush of deals by stock exchange operators had little impact on the big indexes.

Germany's Deutsche Boerse is in advanced talks to buy NYSE Euronext, while the London Stock Exchange agreed to buy Canadian stock market operato.

The dollar was down against a basket of major currencies, with the US Dollar Index off 0.38% at 77.701.

Against the Japanese yen, the dollar was up 0.21% at 82.49.

US Treasury debt prices were higher. The benchmark 10-year note was up 6/32 in price to yield 3.71%.

Bund futures settled at 122.33, down 49 ticks on the day to briefly touch their lowest since mid-April.

US light sweet crude oil fell 24 cents to USD 86.70 a barrel. But North Sea Brent for March delivery climbed above USD 100 a barred, up 90 cents at USD 100.82.

The US Energy Information Administration said domestic crude stocks rose 1.9 million barrels in the week to Feb. 4, a smaller increase than the forecast of a 2.4-million-barrel build.

Nifty Above 5300

Equity showed smart recovery from day's low and turned extremely volatile in trade at 10:20 hours. The Nifty bounced back above the 5300 level, which means traders were providing buying support at the same level. They felt that it could be oversold at this level as it has been falling since previous week.

Haresh Shivdasani, managing director and head of equities at HSBC said the key concern for investors right now is near-term headwinds like inflation and interest rates. “We are perhaps somewhere in mid-cycle and typically these are times of caution,” he informed. He said the mood right now is cautiously optimistic.

Foreign institutional investors were net sellers of Rs 726 crore in equities yesterday, as per provisional data. They were net sellers of Rs 6,300 crore in January 2010. Shivdasani said, first half of 2011 will not be easy for inflows. “We will see flows returning in second half of 2011,” he stated.

Oil & gas, private financial, auto, healthcare and infrastucture companies' shares were supporting the markets for recovery. However, selling continued in BHEL, SBI, ITC, DLF, Hindalco, Sterlite, ACC, Wipro, Reliance Communications, Tata Power and Hero Honda, which were limiting the gains.

The 30-share BSE Sensex gained 62 points at 17,838 and the 50-share NSE Nifty rose 20 points to 5,332 on the back of short covering.

Four shares declined as against one share advanced on National Stock Exchange. The broader indices slipped 1-1.5%.

Heavyweight Reliance Industries and ONGC gained 1.7% each. India's second largest lender ICICI Bank jumped 2% and Kotak Mahindra Bank rallied 4%.

M&M shot up 3% ahead of numbers today. L&T, HDFC, HUL and HDFC Bank were up 0.5-1%.

In midcap space, S Kumars Nationwide, Shriram City, UCO Bank, Dish TV India and IRB Infra gained 2-4% while Prakash Industries tanked 20%. Jai Corp, Man Infra, Jyothy Labs and Allcargo Global fell 7-8%.

In smallcap space, Surana Inds, Symphony, Everonn Education, Kirloskar Inds and Zenith Infotech rallied 4-9% whereas MIC Electronics, Allied Digital, INOX Leisure, C & C Construction and Piramal Life lost 7-13%.