Markets to extend the jubilation on supportive global cues

The Indian markets extended their pre-budget rally and moved higher by about half a percent, on some renewed buying interest of funds in the last session. Today, the start is likely to be good on supportive global cues; traders will also be extending their jubilation of rise in manufacturing, which expanded at the fastest pace since February, supported by growing order flows, especially from overseas. However, there will be some concern about the monsoon, as the government has said that the worst impact of a sub-normal monsoon is likely to be in western India, with possible drought-like conditions in some areas. Though, as per the Met Department, the monsoon is likely to improve after July 6. Meanwhile, the Finance Minister Arun Jaitley has strongly hinted that the upcoming budget would not be an exercise of “mindless populism,” given that the economy is faced with severe challenges. Oil marketing companies will get some advantage with the hike in price of non-subsidised cooking gas (LPG) by Rs. 16.50 per cylinder and that of jet fuel by over half-a-per cent after international oil prices surged due to the ongoing Iraq crisis. Auto sector stocks too are likely to remain in action, as most of the auto makers have reported good growth in their last month’s sale as customers flocked to showrooms fearing a lapse of excise benefits by June-end.

The US markets came out of the consolidation mood and surged in last session, supported by report of faster growth in the Chinese manufacturing sector, traders even shrugged off the report that construction spending increased by much less than expected in the month of May. The Asian markets have made a jubilant start with some of the indices trading at their six-year high taking cues from the rise in Chinese manufacturing.

Back home, extending their winning streak for third day in a row, Indian equity benchmarks ended the session with a gain of around half a percent. Sentiments remained up-beat on report that foreign portfolio investors (FPIs) bought shares worth a net Rs 1,288.16 crore on June 30, as per provisional data from the stock exchanges. Some jubilation also came on report that Business activity in Indian manufacturing sector expanded in June at its quickest pace since February driven by higher domestic and export order flows. The HSBC Manufacturing Purchasing Managers’ Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, rose to 51.5 in the month of June from 51.4 in May. However, gains remained capped on report that output in eight important infrastructure industries, termed as the core sectors, grew at a four-month low of 2.3 per cent in May over a year before, compared to 4.2 per cent in April, with half of these seeing a contraction in production. At the same time, India’s fiscal deficit in the first two months of the 2014/15 financial year touched Rs 2.4 lakh crore, or 45.6% of the full-year target of Rs 5.28 lakh crore, much higher than the deficit of 33.3% during the comparable period in the previous fiscal year.  Global cues remained supportive as European counters made a firm opening, while most of Asian markets too ended in the green terrain. Back home, sentiments got a fillip after public oil marketing companies hiked petrol price by steep Rs 1.69 per litre and diesel by 50 paise. Rally in auto sector too aided the sentiments on the back of better-than-expected sales numbers for the month of June. Maruti Suzuki registered jump of 33.50% in its total car sales (Domestic + Export) for the month of June 2014 at 112773 units, as against 84,455 units in June 2013, while M&M reported sales numbers which stood at 38471 units during June 2014 against 38092 units same month previous year. Moreover, shares related to capital goods counter continued their uptrend after a private survey showed that India’s manufacturing sector growth in June. Finally, the BSE Sensex surged by 102.57 points or 0.40%, to 25516.35, while the CNX Nifty gained 23.35 points or 0.31%, to 7,634.70.