Glare of spotlights!

There are two kinds of light - the glow that illuminates, and the glare that obscures.

After bright starts and finishes for two days, the bulls may find the heat and light a little glaring to handle. Despite smart gains in the main indices the broader market has cooled off. While time seems overripe for frontline stocks to also ease a little, the spotlight will remain on select counters. While US indices fell, European markets did manage some gains, largely owing to strength in commodity shares. We expect a flat opening and a choppy day.

Spurt in crude and other commodities has once again brought inflation into the spotlight, which could dip to its lowest levels. Concerns have also grown over hardening of interest rates in bond markets. Govt may overshoot its estimated borrowings and fiscal deficit could widen.

Subdued credit growth is another worry. Monsoon could be lower than expected. Budget may disappoint. Exports are sliding. Fundamentals of India Inc. are yet to catch up with the surge in stocks. Considering these headwinds, one may argue that the recent run-up has gone too far, too fast. On the bright side, the downside may not be scary.

FIIs were net buyers in the cash segment on Wednesday at Rs7.38bn while the local institutions pumped in Rs5.9bn. In the F&O segment, the foreign funds were net buyers at Rs10.67bn. On Tuesday, FIIs were net buyers at Rs9.9bn in the cash segment. Mutual funds were net buyers at Rs3.2bn on the same day.

Tata Tea is likely to do well on the back of strong results.

US stocks erased partial losses, but that was not enough as they ended lower on Wednesday. Rising bond yields and higher commodity prices added to worries that inflation could limit any recovery effort.

The Dow Jones Industrial Average lost 24 points, or 0.3%, to 8,739.02. The S&P 500 index lost almost 3 points, or 0.4%, to 939.15. The Nasdaq Composite index lost 7 points, or 0.4%, to 1,853.08.

The Dow average climbed above its level at the end of 2008 only to erase its year-to-date gain by the close of trading for the fifth session in the past seven. The benchmark last ended trading above its Dec. 31 close of 8,776.39 on Jan. 6.

The S&P 500 and Nasdaq have been positive for the year since May and April and have climbed 4% and 18%, respectively.

Treasury prices slumped, boosting the corresponding yields. The benchmark 10-year note fell and its yield rose as high as 4% before ending the session at 3.94%, up from 3.86% on Tuesday. Yields rose after the government's sale of $19bn in 10-year notes received lukewarm response - and reports suggested that Russia will cut its share of US debt.

Wednesday's auction was the second of three sales this week that will raise $65bn, part of a record US borrowing program to finance economic recovery measures.

US stocks are coming off the best three-month run since 1982, as measured by the Dow industrials, and the best since the 1930s, as measured by the S&P 500. The run up from the lows of March 9 has lifted the Dow over 30%, the S&P nearly 39% and the Nasdaq around 45%.

New worries have surfaced over the last few days. The bond market is worried about inflation and the rise in commodity prices is adding fuel to fire. There is a little bit of a worry that this will dampen the economic recovery.

Commodity prices have been rallying lately, due to the weak dollar and bets that the economic recovery will drive demand for so-called hard assets. But the rise in commodity prices also added to worries over inflation.

Italian automaker Fiat has closed a deal to buy the good assets of the bankrupt automaker, after the Supreme Court cleared the way for the deal late on Tuesday. Fiat will take a 20% stake in the company to start with, but that holding can increase to 35% if the company reaches certain goals. The new company - called the Chrysler Group - will be majority owned by the United Auto Workers union. The US and Canadian governments will also own stakes. Chrysler is expected to start operating immediately.

On Wednesday, the Obama administration dropped its plan to limit salaries at firms that have taken bailout money and instead introduced legislation to give shareholders more say in executive pay. Washington attorney Kenneth Feinberg was named the new "pay czar."

Home improvement retailer Home Depot said that it now expects full-year earnings in a range of flat to down 7%, versus its earlier guidance for a decline of 7%. Shares were little changed.

The Fed released its periodic "beige book" reading of the economy in its 12 districts. The report showed that the US economy remained weak or got weaker between mid-April and early May, although five of the districts said there are signs the pace of the recession is slowing.

Another report showed the US fiscal year deficit is now near $1 trillion after a $189.7 billion shortfall in May. The April trade balance widened to $29.2 billion from a revised $28.5 billion in March. Economists thought it would widen to $28.7 billion.

In currency trading, the dollar gained versus the euro and the yen.

US light crude oil for July delivery rose $1.32 to settle at $71.33 a barrel on the New York Mercantile Exchange, building on earlier gains after the government's weekly inventory report showed a surprise plunge in crude supplies.

COMEX gold for August delivery settled at $954.70 an ounce, unchanged from Tuesday.

European shares advanced, as hopes for a strong economic recovery in China prompted solid gains for metal extractors and oil producers. The pan-European Dow Jones Stoxx 600 index climbed 1.1% to 212.58, with most of the 15 Stoxx industry sectors in the green. The index rose as high as 215.05 in the session, a level not seen since November.

The UK's FTSE 100 index rose 0.7% to 4,436.75, the German DAX 30 index gained 1.1% to 5,051.18 and the French CAC-40 index climbed 0.6% to 3,315.27.

Indian markets extended the rally to second straight session on Wednesday led by strong cues from the Asian and the European markets. The capital goods, power and the banking stocks were among the top gainers. However, the realty stocks witnessed some offloading.

Finally, the Sensex surged 343 points or 2.2% to end at 15,470 after touching a high of 15,580 and a low of 15,168. The index had opened at 15,168 against the previous close of 15,127.

The NSE Nifty gained 105 points or 2.3% to shut shop at 4,656.

Among the BSE Sectoral indices BSE Capital Goods index was the top gainer surging 3.7%, followed by the BSE Power index up 3.6%, BSE Consumer Durables index up 3%, BSE Bankex index up 2.6% and BSE Pharma index up 2.3%.

The BSE Mid-Cap index gained 1.6% and BSE Small-Cap index up 0.5%. However, BSE Realty index declined 1.2%

Shares of Dr. Reddy's Labs surged by over 4.8% to Rs746 after the company announced that the USFDA granted approval of the company's ANDA for Omeprazole Mg OTC.

Shipment of the product will be phased over the remainder of the fiscal year 2010 with the first shipment likely to commence in early Q2 of fiscal year 2010. Omeprazole Mg is indicated for the treatment of heartburn. Dr. Reddy's formulation contains 20.6mg Omeprazole Mg and the dosage form is a capsule.

Shares of Maytas Infra gained by 4% to Rs86.9 after reports stated that the company will soon start work on two airports in Karnataka. The scrip touched an intra-day high of Rs87.7 and a low of Rs83.5 and recorded volumes of over 1.4mn shares on BSE.

Shares of RCom surged by over 5% to Rs349 after reports stated that the company has signed a JV with Kribhco to market telecom products. The scrip touched an intra-day high of Rs353 and a low of Rs334 and recorded volumes of over 5.1mn shares on BSE.

Shares of OBC gained by 1.2% to Rs179 after reported stated that the bank plans to raise Rs3.5bn to grow and maintain comfortable CAR. The scrip touched an intra-day high of Rs183.9 and a low of Rs178 and recorded volumes of over 82,000 shares on BSE.

Shares of Satyam and Tech Mahindra further extended gains on Wednesday after Satyam disclosed standalone unaudited financial results for the quarter ended December 31, 2008

The company’s Profit after tax for the October-December quarter stood at Rs1.81bn while the total income for the period was Rs22.06bn.

Operating profit (excluding other income) for the third quarter of FY09 is Rs3.64bn, while the operating profit margin is 15.87%. The PBIDT for the quarter stood at Rs2.76bn while the PBIDT margin was 12.51%.

Satyam shares were frozen at 10% upper circuit for second straight trading session to Rs73.50 as against previous close of Rs66.80 on Tuesday. The total quantity traded on BSE was 1.3mn.

Shares of Tech Mahindra also rallied by over 5.5% to Rs8784 hitting an intra-day high of Rs860 and a low of Rs759 recording volumes of over 3.7mn shares on BSE.

Given the outstanding rally in the past two days and with the NSE Nifty shutting shop above the 4,650 levels, bulls will look to extend gains. However, will Nifty sustain above the crucial technical level has to be seen. One cannot rule out profit booking at higher levels.