F&O series expiry session to get a gap-up start tailing jubilant global cues

The Indian markets suffered another big sell-off in last session and markets despite showing some early recovery sign ended lower by over a percent. Today, the start of the F&O series expiry session is likely to be a gap-up one on jubilant global cues. Apart from short covering and bargain hunting traders will be getting some support from a report of India Ratings that the government can spend an additional Rs 37,200 crore more this fiscal year in infra investments or bank recapitalisation and still not miss the 3.9 percent fiscal deficit target, attributing the surplus to the higher indirect tax collections, which till July rose a healthy 39 percent and a massive decline in crude prices. The infra stocks are likely to remain in action, as the Centre has allowed road developers to completely exit BOT (build-operate-transfer) projects two years after completion and invest the funds in incomplete highway projects, power plants or retire debt. However, there will be some cautiousness too, with the RBI Governor Raghuram Rajan’s statement that it will be “a long time” before India can replace China as a growth engine for the global economy, even if it grows at a faster rate. Aviation stocks too will be buzzing, as the Prime Minister has said that the financial aspects of various proposals being included in the civil aviation policy must be considered before making them a part of the policy. Textile stocks may see some action, as the textiles ministry is making out a case for keeping the industry in the lowest slab of the proposed GST.

The US markets rallied strongly in last session, posting their best one day gain since 2011; apart from bargain buying some positive economic data too supported the markets and hopes that Fed may delay raising interest rates. Commerce Department reported that durable goods orders unexpectedly increased in July. The Asian markets have made a strong start, with some indices gaining around two percent in the early deals. Japanese Nikkei was heading for its biggest two-day increase in nine months.

Back home, penultimate session of F&O series expiry turned out to be a daunting one for stock markets in India, with benchmarks ending below their crucial 7,800 (Nifty) and 25,800 (Sensex) levels. Key domestic markets, resuming their southward trend, clobbered out of shape with frontline gauges shaving off over a percentage point on Wednesday as traders booked profit mainly in last leg of trade. Earlier, after a gap-down opening markets witnessed significant recovery as traders got some support with the global rating agency Moody’s latest report 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. Traders got some sense of relief with Reserve Bank of India Governor Raghuram Rajan’s statement that there is confidence that we are actually quite healthy, last time we did not have the confidence that is the big difference this time. However, the sentiments were spooked largely in last leg of trade where frontline gauges once again entered into red terrain as investors feared fresh rate cuts in China may not be enough to stabilise its slowing economy or halt a stocks collapse that is wreaking havoc in global markets. Depreciation in Indian rupee too dampened the sentiments. The rupee depreciated by 4 paise to 66.14 against the US dollar at the Interbank Foreign Exchange at the time of equity market closing due to fresh dollar demand from importers. Moreover, the traders will be keenly watching whether the government succeeds in convening a special session of Parliament to pass the crucial GST bill. Global cues too remained sluggish with European counters making an awful start, while Asian markets making a mixed closing. Back home, the IT sector, which showed smart recovery on rupee weakness and remained resilient for most part of the day, gave up and ended in red. Finally, the BSE Sensex plunged by 317.72 points or 1.22 % to 25714.66, while the CNX Nifty declined by 88.85 points or 1.13 % to 7791.85.