Markets to get a flat but positive start; global development eyed

The Indian markets witnessed resumed buying interest in last session and the major indices surged around a percent and half. Today, the start is likely to be flat-to-green and traders will take the stock of global scenario before going long. However, a follow through to the last session gains is expected on signs of government’s seriousness to tackle the inflation menace, amid reports that drought-like conditions have developed in large parts of the country as the monsoon deficit has widened to a worrying 49% since the start of the season on June 1. The government imposed a minimum export price (MEP) of $300 per tonne on onion to curb overseas sales and check retail prices. Also, the government is considering steps to discourage exports of milk products in the wake of rising retail prices. Rising prices of essential food items like vegetables, fruits and cereals, pushed up wholesale price index based inflation to five-month high in May. There will be some buzz in the oil & gas stocks as the Oil minister Dharmendra Pradhan has said that the government would overhaul policies for the oil industry to make them "predictable, transparent and fair" to investors. Power stocks too will see some action as six out of nine players that qualified to compete for two showcase power projects in Odisha and Tamil Nadu want to exit unless the bid terms are reworked.

The US markets rose for the third straight day despite the brewing tension in Middle East and the International Monetary Fund trimming 2014 US economic growth forecast to 2% from 2.8%. The economic news too remained mixed but traders largely concentrated on FOMC policy announcement Wednesday afternoon. The Asian markets are trading mixed after some of the indices pared their early gains ahead of the Federal Reserve monetary policy decision. The Chinese market was marginally in red after country’s house prices fell in 35 cities in May.

Back home, Tuesday’s session turned out to be a fabulous day of trade for the Indian equity markets, where frontline gauges garnered gains of around one and a half percent. Hectic buying activity which took place during last leg of trade mainly drove the markets higher, with frontline gauges ending at intraday high levels, recapturing their crucial 25,500 (Sensex) and 7,600 (Nifty) bastions. Earlier, domestic bourses traded listlessly for most part of the day's trade near their previous closing levels as sentiments remained dampened on concern over rising crude oil prices. Report that foreign portfolio investors (FPIs) sold shares worth a net Rs 194.10 crore on June 16, 2014, too weighed down sentiments. However, sentiments took U-turn in last hour of trade as market-participants opted to take positions in beaten down but fundamentally strong stocks. Some solace also came after Reserve Bank of India’s (RBI) Governor Raghuram Rajan reassured markets that India is better prepared to deal with external shocks than last year, when warnings by the U.S. Federal Reserve that it would scale back its monetary stimulus hit the rupee. Meanwhile, Finance Minister Arun Jaitley has attributed the rise in inflation partly to withholding of food stocks by traders and has said the Centre is committed to ease supply side bottlenecks and has also asked states to take firm measures against hoarders to check speculation. Recovery in European counters too supported the sentiments, while the Asian Markets too settled mostly in the green. Back home, stocks from software and technology counters remained the flavor for yet another session on account of Rupee depreciation to two months low level as oil companies rushed to buy the greenback as escalating crisis in Iraq triggered concerns over inflation and current account deficit. Meanwhile, stocks of oil marketing companies viz. BPCL, HPCL and IOC too remained on buyers’ radar for second consecutive session after reports suggested of losses in diesel slipping to record low level of Rs 1.62 per litre. Additionally, fertilizer stocks rallied in the range on hopes of announcement of reforms for the sector in the upcoming budget to be presented by the new government. Finally, the BSE Sensex soared by 330.71 points or 1.31%, to 25521.19, while the CNX Nifty surged by 98.15 points or 1.30%, to 7,631.70.