Markets to remain in somber mood on the F&O expiry day

The Indian markets took a breather in last session and gave up modest gain after a big rally. Today, the expiry day of the June F&O series is likely to be a bit soft reacting negatively to the Cabinet Committee on Economic Affairs (CCEA) decision of deferring the gas price hike by three months, though some volatility and cover up can be seen in latter part of the trade. Meanwhile, reacting to the gas price issue, Law Minister Ravi Shankar Prasad has said that “the structure and mechanism of the price will need to be reviewed.” Though, the move will provide interim relief to the consumers as there will be no hike in price of CNG, piped natural gas and power, with power and fertilizer stocks moving up, but on the same time stocks like RIL and ONGC are likely to come under pressure with the deferral. The PSU oil marketing companies too are likely to be weighed down with the government announcing that it is not considering raising prices of LPG and kerosene. Though, there will be some consolation to the whole oil & gas sector, as the government has said that Iraq crisis is not likely to affect oil supply to India as oil pipeline coming to the country are from Southern Iraq, which terrorist have not targeted. There will be some buzz in the cement stocks, as the Confederation of Real Estate Developers Associations of India (Credai) has asked the government to intervene in the recent “steep increase” in cement prices by southern manufacturers and roll back prices.

The US markets made a bounce back and ended higher, offsetting the weakness seen in the previous session, on optimism about an economic recovery. Traders overlooked the larger contraction in GDP in the first quarter with report of growth in the service sector in the month of June. The Asian markets have mostly made a green start tailing cues from the US market which didn’t react negatively to the revised GDP data.

Back home, after witnessing gains of over a percent in previous session, Indian equity indices went through consolidation on Wednesday as investors remained on sidelines on the penultimate day of F&O expiry. Benchmark indices moved in a narrow range throughout the session with bouts of volatility witnessed during the trade. Investors remained cautious after United Nations Conference on Trade and Development (UNCTAD) in its latest World Investment Report said that India’s macroeconomic uncertainties remain a major concern for investors even as the country saw a 17% increase in foreign direct investment (FDI) to $28 billion in 2013.  However, losses remained capped as some support came as the government proposed relaxing certain provisions for private companies in the new Companies Act. Meanwhile, finance secretary Arvind Mayaram, in an effort to boost the morale of investors has said that government's maiden budget will be ‘growth-oriented’ with some ‘major changes’ in policies to lift the economy to a higher growth orbit from the less than 5% expansion seen in the last two years. Global cues too remained subdued with European counters trading lower in early deals, while the Asian markets ended in the red. Back home, selling in Oil & Gas space too dampened the sentiments on account of escalating tensions in Iraq, which threatened to push up Brent crude price. Stocks from the sector edged lower ahead of outcome of oil minister Dharmendra’s meeting with cabinet amid speculation that country could raise gas prices from July 1, 2014. Scrips related to Railway sector too declined on profit-booking after reports suggested of government partially rolling back steep railway fare hike announced last week after protests from allies, highlighting the political realities facing the new prime minister in his push to cut the country's massive subsidy bill. Finally, the BSE Sensex declined by 55.16 points or 0.22%, to 25313.74, while the CNX Nifty lost 10.95 points or 0.14%, to 7,569.25.