Markets to get a green but cautious start after five days of gains

The Indian markets making a smart bounce back from the lows of the day extended their gains in last session, and major averages posted gains of over half a percent despite weak Services PMI data. Today, the start is likely to be in green, though there will be some cautiousness too, as the International Monetary Fund (IMF) has cut its global growth forecasts for a second time this year, citing weak commodity prices and a slowdown in China and warned that policies aimed at increasing demand were needed. IMF has also lowered India's growth forecast to 7.3 per cent this year, from its earlier estimate of 7.5 per cent, and said that a faster-than-expected deceleration in inflation provides leeway for modest cuts in interest rates. Also, Moody's Investors Service has said that with India facing fourth largest number of terror attacks across the world in 2013, such incidents have a significant and long-lasting negative impact on the economy. However, traders will be getting some support with report that foreign investors have been big buyers of Indian stocks so far this month. There will be some somberness in infra stocks as the Crisil Ratings has said that about 5,100 km of under-construction highway projects worth Rs 67,200 crore are under high risk. It has also said that apart from this, 2,400 km operational BOT projects worth Rs 25,800 crore are at high risk mainly due to weak financial profile of sponsors and inability to service debt.

The US markets made a mixed closing in last session, with S&P snapping its five days gaining streak, largely due to profit taking, as traders cashed in on the strong upward move seen over the two previous sessions. The Asian markets have made mostly a positive start and some of the indices are building on their biggest five-day advance in almost four years. Japanese market has though pared its early gains with the strength in yen.

Back home, extending their winning streak for fifth day in a row, Indian equity benchmarks ended the session with a gain of over half a percent. Domestic gauges, after a firm start, gave up their entire gains in noon deals as sentiments weakened after the seasonally adjusted Nikkei Business Activity Index slowed to 51.3 in September from 51.8 in August, but remained above the 50-mark for the third straight month which separates contraction from expansion. Choppiness also crept in after the government has said that the total revenue collection will fall short by Rs 50,000 crore (5-7 per cent) in the current financial year mainly because of subdued growth in direct taxes. Hectic buying activity which took place during last leg of trade mainly drove the markets higher, with frontline gauges ending at intraday high levels, recapturing their crucial 26,900 (Sensex) and 8,150 (Nifty) bastions. Sentiments turned upbeat after outlining the roadmap of the BJP-led government for the coming months, Finance Minister Arun Jaitley said that the Goods and Services Tax (GST) will be a “top priority” and he hopes to take the Bankruptcy Code to Parliament in the Winter session. Prime Minister Narendra Modi too in a speech to Indian and German businesses said that government hopes to roll out a new GST in 2016. Some support also came with Finance Minister’s statement that India has now reached a situation where it is no longer satisfied with a 6 to 8 percent growth rate and most Indians believe that “my normal is eight plus (growth rate), probably closer to nine per cent” and higher. On the global front, European counters made a weak start, though all the Asian markets ended in green. Back home, some support came with reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 649.90 crore on Monday, as per provisional data released by the stock exchanges. Meanwhile, sugar stocks remained on buyer’s radar after reports that the government is working on a new subsidy scheme to be implemented in the current 2015-16 season, to boost export of surplus sugar and help mills clear dues of over Rs 12,000 crore to farmers. Finally, the BSE Sensex surged by 147.33 points or 0.55% to 26932.88, while the CNX Nifty gained 33.60 points or 0.41% to 8152.90.