Markets to make a cautious start after the big gains

The Indian markets , after a slow start gained momentum in final hours of last session to mark the largest one-day advance since February. Although, the manufacturing data was disappointing but traders lapped up beaten down stocks, while auto stocks gave a thrust after announcing an increase in April sales. Today, the start is likely to be flat-to-green and trade may show some consolidation after the big gains. Traders will be a bit cautious on a private report that the level of optimism about business environment among chief financial officers in the country declined in April-June period largely owing to slower pace of reforms than initially expected and weak profit level of the corporates. Also, marketmen will be eyeing the development in the parliament where the Rajya Sabha is likely to see a heated debate over the Real Estate Regulatory Authority Bill that is listed for consideration today. The main opposition Congress has said that it will oppose the bill strenuously as it is anti-home buyer and pro builder. Meanwhile, Finance Minister Arun Jaitley has sought “deeper engagement” of the ADB for development of smart cities, industrial corridors and railways as part of flagship initiatives like ‘Make In India’ and ‘Skill India’. There will be some buzz in the IT sector, with IT major Cognizant’s earnings coming above expectations. The company has expressed confidence of delivering margins in the 19-20 percent range on a non-GAAP basis.

The US markets moved higher in last session supported by biggest gain in US factory orders in eight months, though major averages ended well off their best levels of the day with monthly jobs report due on Friday in spotlight. The Asian markets have made mostly a positive start amid speculation that central banks in the region may increase monetary stimulus.

Back home, Indian equity benchmarks started May Future and Option (F&O) series on strong note on Monday, by rallying around two percentage points and breaking lots of psychological levels in their northward journey as investors opted to buy beaten down but fundamental strong stocks after two days of drubbing. Sentiments remained positive since beginning of the trade and there appeared not even an iota of profit booking in the session as the benchmarks managed to fervently gain from strength to strength as investors continued hunt for fundamentally strong but oversold stocks. Sentiments remained jubilant after the Indian government provided some relief to foreign investors, clarifying that minimum alternate tax (MAT) will not apply to capital gains on the sale of securities, royalty, technical service fees and interest income. On the economic front, the Indian manufacturing economy recorded a growth slowdown during April. Total new orders increased at a weaker pace and, as a consequence, companies reduced staffing levels and raised output to a lesser degree. The headline HSBC India Purchasing Managers’ Index (PMI), compiled by Markit, slowed to 51.3 in April from 52.1 in March. Buying got intensified as European counters made a firm opening, while Asian stocks bounced from their lows on Monday and ended mostly in the green. Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too equally participated in the rally. Frontline indices managed to settle near intraday high levels with Sensex recapturing its crucial 27,450 bastion, while Nifty ended above its crucial 8,300 mark. Buying in auto space too supported the sentiments with most of the companies releasing better-than-expected monthly sales data for April. Meanwhile, stocks related to state-run upstream oil companies and GAIL (India) rose on reports that the government will foot the entire subsidy bill that oil marketing companies incur on selling liquefied petroleum gas (LPG) and kerosene below market prices. Finally, the BSE Sensex surged by 479.28 points or 1.77% to 27490.59, while the CNX Nifty soared by 150.45 points or 1.84% to 8,331.95.