The Indian markets were caught in double whammy of gas price deferral and F&O series expiry in last session, and suffered cuts of about a percent. Today, the start of the new series is likely to be a bit cautious but the markets may recover in the latter part of the trade. Traders will be getting some support with the Reserve Bank of India (RBI) stating that prospects of economic recovery in India look bright following the formation of a stable government, though supply side issues need to be solved to help monetary policy bring down inflation. Meanwhile, amid weakening monsoon Prime Minister Narendra Modi has asked for close coordination between the centre and states on implementing contingency plans to tackle the situation and prevent rise in food prices. The oil & gas sector stocks are likely to keep buzzing on reports that the government is weighing the option of switching to a mechanism of fixed return on investment for producers and setting domestic gas prices in rupees instead of dollars. The banking stocks are likely to come under pressure as a bi-annual Financial Stability Report of RBI has said that risks to the stability of Indian banks have increased in the six months ended 30 March as asset quality stress remains high and lenders are weighed down by the slow pace of economic expansion and high inflation. On the same time companies related to defence supply may get a boost as licensed items list has been reduced by 60%.
The US markets ended modestly lower in last session after a Federal Reserve official said interest rates should rise by early 2015. Though, the major indices recovered from early weakness on report that spending edged up by 0.2 percent in May and initial jobless claims edged down in the reporting week, though less than expected. The Asian markets have made mostly a lower start on concern US may raise its interest rates.
Back home, Indian equity markets truly depicted the choppiness of F&O expiry session on Thursday and after a cautious start markets extended their southward journey to close with a cut of around a percentage point. Final hour of trade proved to be the curse for the markets and bourses settled below their crucial 25,100 (Sensex) and 7,500 (Nifty) bastions. However June series proved a strong one for the markets with benchmark indices gaining over 3% each for the series. There was across the board strength in the markets during the series with broader indices gaining in the range of 7-11%. After trading in tight band for most part of the day’s trade, domestic gauges crashed like house of card in the last leg of trade as investors offloaded their positions an hour before the end of F&O contract expiry day. Sentiments remained dampened as investors reacted 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, commenting on the deferment of gas price issue, Law Minister Ravi Shankar Prasad has said that ‘the structure and mechanism of the price is needed to be reviewed’. Moreover, reports which indicated drought-like conditions intensifying with the monsoon not moving an inch for 10 days now, leaving oilseeds, pulses and paddy fields parched and posing the threat of food inflation and weak rural demand in the first year of the Narendra Modi government, also dampened the sentiments. Investors shrugged off positive global cues with European markets were trading in the green terrain in early deals, Asian markets too rallied for the day. Back home, sentiments remained down-beat on the back of depreciation in Indian rupee against dollar. The rupee was trading at 60.15/16 at the time of equity markets closing versus its previous close of 60.12/13. Meanwhile, slump in Oil & Gas counter too played spoil sport for the Indian equity markets after government on Wednesday deferred a decision to raise prices of locally produced gas for next three months, saying the matter requires more discussion. On the flip side, auto and consumer durable stocks gathered some traction after government extended excise duty concessions for these sectors, were limiting further downside of the market. Finally, the BSE Sensex plunged by 251.07 points or 0.99%, to 25062.67, while the CNX Nifty declined by 76.05 points or 1.00%, to 7,493.20.
