Markets to make a cautious but positive start

The Indian markets in last session managed a close of modest green supported by some fund buying. Today, the start of the new week is likely to be cautious but mildly in green, traders will be eyeing some key economic data later in the week followed by the rail and union budget next week for directions. There will be concern about the delayed monsoon which can cause a drop in agricultural output and push prices high. According to a private weather forecaster Skymet, the total rainfall received by India in June this has been the least in the month in 10 years. Also, the oil and gas sector will keep weighing down the sentiments on report that after putting off implementation of a contentious gas pricing formula, the new government will start consultations afresh with all stakeholders to arrive at an acceptable increase in natural gas rates. However, the market is banking on start of an investment cycle and government action. It has been reported that in budget the new government may enhance the Plan expenditure for 2014-15 by around Rs 11,000 crore in the Budget next month, which would be about 2 per cent higher than what was provided in the previous fiscal’s budget. There will be some buzz in the steel stocks on report that Eastern region is set to push India's steel capacity with an investment of nearly Rs 9 lakh crore for creating an additional 160 million tonnes per annum (mtpa) capacity in the next 10-15 years.

The US markets ended higher in last session supported by a late rally but there was cautiousness on uncertainty about the near-term outlook for the markets even though the consumer sentiment improved in the month of June. The Asian markets have mostly made a green start with some of the indices approaching their biggest quarterly advance on decline in crude prices, though the Japanese market was marginally in red as yen strengthened.

Back home, key domestic benchmarks managed to keep their head above water on Friday with nifty recapturing its crucial 7,500 mark, while Sensex ended tad below its crucial 25,100 mark as investors opted to buy beaten down but fundamentally strong stocks, after two sessions of drubbing. Overall, sentiments remained up-beat after Reserve Bank of India (RBI) stated 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. Positive opening in European counters too supported the sentiments, however, all the Asian markets shut shop in the red. Back home, gains remained capped as investors remained cautious on concerns that the weak monsoon would further accelerate inflation. Monsoons remained inadequate (31% below average) till 25th of June. The shortage of rainfall is bound to hurt farm output and spur inflation, thus reducing the scope for monetary easing by the central bank. While the continuing crisis in Iraq also weighed on sentiment. Meanwhile, select shares related to Oil and Gas counter ended in red after the Modi-led government deferred the oil price hike yesterday. Also, there was some concern after a report that at least 11 people are feared killed and 15 suffered burn injuries in a big explosion at GAIL’s pipeline at Nagaram village in East Godavari district of Andhra Pradesh. Finally, the BSE Sensex gained 37.25 points or 0.15%, to 25099.92, while the CNX Nifty added 15.60 points or 0.21%, to 7,508.80.