Markets to make a positive start on supportive global cues

The Indian markets rallied in last session, extending the jubilation of more than expected cut in key policy rates by RBI. Today, the start is likely to be in green on supportive global cues; however there will be some cautiousness in the markets as the growth in the key core sector remained sluggish despite improvement, the eight core sectors grew at an annual 2.6% in August. Also, the rating agency Fitch Ratings has lowered India’s GDP growth estimate for the current fiscal to 7.5 percent from 7.8 percent on average monsoon but said the country is poised to grow at 8 percent next fiscal on reform push. Traders will also be concerned with the monsoon season ending on Wednesday with a 14% deficit, making it the weakest monsoon since 2009. In terms of average countrywide rainfall during the season (June-September), this year was the third lowest since 1979. Meanwhile, RBI governor Raghuram Rajan describing Prime Minister Narendra Modi as being “ahead of us” said that his visits abroad need to be backed up with “action on the ground” to reinforce the “good impression that is created”. There will be some somberness in the whole IT pack after HCL Technologies, India's fourth-largest information technology services company, forecasted tepid revenue growth for its July-September quarter as it weathers the impact of fluctuating currencies, a client specific issue and uneven revenue growth.

The US markets rallied in last session in reaction to rallies by stocks overseas and on a report from payroll processor ADP showing stronger than expected private sector job growth in the month of September. The Asian markets have made mostly a positive start tailing the overnight gains in US markets and signs of stabilization in China, though the nation’s markets are closed for a week. Japanese market has taken the lead, trading higher by around two percent in early deals.

Back home, Wednesday’s session turned out to be a fabulous day of trade for the Indian equity markets, where frontline gauges, extending their previous session’s jubilation, garnered gains of around one and a half percent as investors continued to cheer bigger than expected repo rate cut of 50 bps for second day in a row. The central bank has also hiked limit for FPI investment in government bonds to 5 per cent of the outstanding stock by March, 2018, a move that will bring in an additional Rs. 1.2 lakh crore in G-Sec. Traders also got encouragement with report that India has become the top destination for FDI in the world. With $31 billion of foreign capital inflows, India has surpassed China and the US to take the pole position in attracting largest FDI in the first half of 2015. Some support also came after the Chief Economic Advisor Arvind Subramanian said that the government is committed to contribute its share by adhering to its fiscal deficit target so that inflationary pressures remain under control. Buying intensified in last leg of trade with European counters making a firm start, Asian markets too ended in green. Back home, sentiments remained up-beat since start as key bourses made a gap-up opening 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 their hunt for fundamentally strong stocks. Frontline indices not only extended their rally for second straight session but also ended near intraday high levels, with Sensex recapturing their 26,100 marks, while Nifty ended just shy of 7,950 mark. Buying in metal counter aided sentiments as commodity prices edged higher overnight. Stocks related to steel counter too remained on buyers’ radar on reports that the domestic steel producers are expected to take advantage of the hike in safeguard duty and increase prices by up to Rs 1,500 per tonne. Finally, the BSE Sensex surged by 376.17 points or 1.46% to 26154.83, while the CNX Nifty soared by 105.60 points or 1.35% to 7948.90.