Markets likely to give up some of their last session gains in early trade

The Indian markets witnessed some recovery in last session on short covering and value buying. Traders sentiments were also soothed by the assurance from PM and FM about the firm domestic economic condition. Today, the start of the penultimate session of August F&O series expiry is likely to be a bit cautious and markets may give up some of their last session gains in early trades. However, some recovery can be expected in the latter trade on short covering as the F&O activities intensifies. Traders will also get some support with Reserve Bank of India Governor Raghuram Rajan’s statement that global financial markets may be in turmoil but Indian investors shouldn't worry too much. He said that there is confidence that we are actually quite healthy. Also, the government has said that it was prepared to convene the second part of the monsoon session to pass crucial legislation, most importantly the goods and services tax bill. Meanwhile, global rating agency Moody’s has said that it will upgrade India's rating if the government is able to push through reforms, inflation stabilises, regulatory environment improves and infrastructure investment rises. There will be some buzz in the banking sector, after the RBI said that soon four to six domestic lenders would be labeled systemically important, or the rough equivalent of too-big-to-fail in other countries.

The US markets continuing their downslide ended lower in last session, though there was some strength in early trade but traders remained concerned about developing economies and the outlook for US interest rates, even though a report showed notable rebound in new home sales in the month of July. The Asian markets have made mostly a lower start, though some markets were in green too on hopes that China’s interest-rate cut will help calm a rout in emerging-market equities. China announced a cut in its interest-rate, fifth since November.

Back home, Indian equity benchmarks, despite volatile session, staged splendid performance on Tuesday to recover some of their previous session’s losses, with frontline gauges recapturing their crucial 26,000 (Sensex) and 7,850 (Nifty) levels as investors opted to buy beaten down but fundamentally strong stocks. Markets after a positive start lost their momentum towards the noon deals and entered into red terrain following the slump in Chinese markets, but gradually markets started recovering and managed to end near intraday high levels. Sentiments turned buoyed in second half after the government has said it was considering reconvening Parliament to make another attempt to pass the Goods and Services Tax (GST). The Union Minister, M Venkaiah Naidu, said that government may convene second part of the Monsoon Session to pass key legislations after talking to all the political parties. Traders also got some support with Finance Minister’s statement that the economy is in a revival phase and hint that it will clock a growth rate in excess of 8 per cent in 2015-16, after the total indirect tax collections during the first four months of the fiscal rose by 37 per cent. Some encouragement also came with the SBI Composite Index’s report that has stated that Country’s manufacturing sector growth improved both in terms of month-on-month as well as yearly basis in August. Firm opening in European counters too helped sentiment, Asian markets too ended mostly in green. Back home, significant recovery in Indian rupee against dollar too aided the sentiments. The beaten down rate sensitive counters like realty and banking too remained in jubilant mood despite RBI governor Rajan reiterated that taming inflation was essential for sustained long-term growth instead of steroids in the form of lower rates, or an easier liquidity position. Finally, the BSE Sensex surged by 290.82 points or 1.13% to 26032.38, while the CNX Nifty soared by 71.70 points or 0.92% to 7880.70.