Markets to extend the gains with a positive start of the new series

The Indian markets despite some late hour volatility managed to post good gains in the last session, supported by some upbeat earnings and government’s policy actions. Today, the start of the new F&O series is likely to be flat-to-green and the markets will extend the gains with Nifty trying to reclaim the 8450 level. Traders will be getting some support with the government notifying  composite cap in the FDI policy, allowing up to 49 per cent foreign portfolio investment (FPI) through the automatic route in most sectors, including brownfield pharmaceuticals, single-brand retail, insurance, pension and facsimile editions of foreign newspapers. There will be some cautiousness too, in the markets with research arm of global rating agency Moody’s warning that the economic expansion might slow down due to lack of reforms, though it has predicted a 7.6 percent growth rate for India. Meanwhile, after the cabinet approved the amendments to the GST Bill, the government has said that it is currently working on the rates to be implemented for the proposed reforms to India`s indirect tax regime. There will be some somberness in the coal and power stocks, as the World Bank has decided not to invest in any coal-related project, be it a coal mine or a thermal power plant. Also, there will be lots of stocks specific action in earnings season based on performance.

The US markets made a flat closing in last session, despite making a good recovery in the latter part of the trade, though Nasdaq managed to extend its gains. The Asian markets have made mostly a positive start; however the Chinese market was once again trading in red, heading for its worst monthly drop in almost six years.

Back home, F&O expiry session turned out to be a fabulous day of trade for the Indian equity markets, where frontline gauges garnered gains of over half a percentage point to recapture their crucial 27,700 (Sensex) and 8,400 (Nifty) bastions. Markets traded in green throughout the session as sentiments remained up-beat with reports suggesting that the Union Cabinet has approved amendments to the GST bill to compensate states for revenue loss for five years on introduction of the uniform nationwide indirect tax regime, as has been suggested by Rajya Sabha Select Committee. Some support also came with a statement of World Bank official that India has the potential to become a multi-trillion dollar economy with a per capita income of about $40,000 by 2050 if it manages to grow at seven percent annually for the next 30-35 years. Marketmen also got some encouragement with global rating agency, Moody’s latest report stating that India’s true potential of GDP growth rate lies somewhere near 10%. It added that green shoots are slowly emerging, but the government's failure to deliver promised reforms is the major impediment. It also cautioned that GDP growth is not likely to rise above 7.5% if the government continues to overpromise and not deliver. However, investors book some of their profits in second half of trade ahead of the expiry of July derivative contracts. On the global front, European counters traded in green in early deals, while the Asian markets ended mostly in red. 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. Buying in infrastructure counter too aided the sentiments after the Union Cabinet approved creation of a Rs 20,000-crore National Investment and Infrastructure Fund (NIIF), a sort of sovereign fund, for development of infrastructure projects, including the stalled ones. Finally, the BSE Sensex surged by 141.92 points or 0.51% to 27705.35, while the CNX Nifty gained 46.75 points or 0.56% to 8421.80.