Markets to make a positive but cautious start reacting to Fed’s decision

The Indian markets despite some late hour profit booking extended their gains for the fourth straight session. Today, the start is likely to be in green but cautious tailing the muted trend in the regional markets, after the Federal Reserve left its benchmark interest rate unchanged at near zero. Traders will be a bit concerned with SBI Composite Index, an indicator for manufacturing activity in the country, for June 2015 declining to 53.2 from 56.5 in May 2015. Manufacturing sector growth declined in June both in terms of month-on-month as well as yearly basis, amid declining exports and fall in corporate earnings. Traders will however, be getting some support with report that the Finance Ministry has set up two committees to suggest tax rates and look into IT preparedness for the new indirect tax regime in its bid to roll out GST from April 1, 2016. Steel sector stocks will keep buzzing after the government, in a much needed relief for domestic producers increased the basic customs duty (BCD) on certain long and flat steel products by 2.5 percent.

The US markets ended modestly in green in last session after a volatile day of trade, reacting to the Federal Reserve's monetary policy announcement. There were relatively dovish signals from the Federal Reserve reinforcing the view that the eventual increase in interest rates will be gradual. The Asian markets have retreated after mostly a positive start.

Back home, extending their northward journey to fourth straight session, Indian equity benchmarks ended higher with a gain of over half a percent on Wednesday. Markets traded with traction throughout the session, though gains remained capped as traders remained worried about the US Federal Reserve's highly anticipated monetary policy announcement later in the day. Overall, sentiments remained up-beat since beginning with Asian Development Bank president Takehiko Nakao's statement that the bank is looking to increase exposure in India, especially in infrastructure, skill development and urban services, and proposes to increase lending to the country by almost half to $12 billion by 2018. Also, the progress in monsoon has lifted the sentiment on Dalal Street. According to India Meteorological Department (IMD), the country received 36.4 mm of rain on June 1-10, though rain for the central and northwestern parts remained a cause of concern. Traders seems to have got a boost with report that Finance Minister Arun Jaitley who embarked on a roadshow to hardsell the India growth story to investors in a bid to attract investment will hold meetings with Foreign Institutional Investors (FII) and top CEOs of American financial companies during his nine-day visit to the United States. On the global front, European counters traded in red in early deals, while Asian shares ended mostly in the green. Back home, appreciation in Indian rupee too supported the sentiments. Rally in steel shares too aided the sentiments on reports that the government has notified hike in long steel products to 7.5% from 5.5% and flat steel products to 10% from 7.5%. Import duty hike translates into hike of Rs 600 per tonne on imported steel which will ease price pressure on domestic steelmakers. Finally, the BSE Sensex surged by 146.15 points or 0.55% to 26832.66, while the CNX Nifty gained 44.25 points or 0.55% to 8091.55.