Markets to make a flat-to-cautious start after the surge of last session

The Indian markets showed marvelous performance in last session, supported by government announced spate of policy reforms and hopes that US Fed’s rate hike will be gradual. Today, the start is likely to be flat-to-cautious tailing the sluggishness in the global bourses and markets will be consolidating after the big gains. Traders will be first reacting to the recommendations of the 7th Pay Commission, which has suggested a 23.55 percent hike in salary, allowances and pension involving an additional burden of Rs 1.02 lakh crore. The pay panel, headed by Justice A K Mathur, in its report submitted to the finance ministry has suggested an increase of 16% in basic salary, 63% in allowances and 24% in pension. It doubled the entry and top level pay while favoured a virtual OROP for civilians. Meanwhile, the Finance Ministry has said that it can “handle” financial implications of the recommendations of the Seventh Pay Commission and will work out modalities for implementation of the suggestions. The consumer goods, consumer durable and auto stocks will see some upmove with the report, as it will impact them due to rise in disposable income of consumer which will push up demand and absorb the excess supply in the system. The sugar stocks are likely to remain under pressure, on report that India's sugar production rose by 33 percent to 7.61 lakh tonnes till November 15th in the current marketing year on higher output from Maharashtra. 

The US markets made a modestly lower closing in last session, the trade remained lackluster digesting the latest batch of US economic news, while there was modest drop in initial jobless claims, there was slightly bigger than expected increase in the index of leading economic indicators of Conference Board. The Asian markets have made a mixed start with of the indices witnessing profit taking after gains of last few sessions. The strength in yen has led the Japanese markets lower.

Back home, Indian equity benchmarks staged an enthusiastic performance on Thursday, by rallying around one and a half percentage point and reclaiming their lots of psychological levels in their northward journey. Sentiments remained positive since beginning of the trade and there appeared not even an iota of profit booking in the session, as the benchmarks managed to fervently gain from strength to strength with investors continued hunt for fundamentally strong but oversold stocks owing to strong global cues. The rally came after traders cheered the wave of policy reform announcements by the government. The Cabinet Committee on Economic Affairs (CCEA) approved a 10 per cent stake sale in Coal India, an initial public offering at Cochin Shipyard and a five-year interest subsidy scheme to boost sagging exports. CCEA also empowered the National Highways Authority of India (NHAI) to revive 34 stalled projects.  Some support also came with Chief Economic Adviser Arvind Subramanian’s statement that Inflation is completely under control and it is well within the target of the Reserve Bank. Subramanian also added that India needs to boost its growth with public spending and as well as private investment. The central bank has targeted an inflation level of 5.8 percent by January 2016. Global cues too remained jubilant with European counters making firm start, while the Asian markets rallied. 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. Frontline indices managed to settle near intraday high levels with Sensex and Nifty recapturing their crucial levels of 25,800 and 7,800 respectively. Recovery in Indian rupee too supported the sentiments. Buying in software pack too aided sentiments after Infosys rebounded around 3 per cent today coming off its losses in last few sessions. Export oriented companies, especially the textile stocks remained in lime light with the government announcing 3 per cent interest subsidy scheme for exporters. Shares of railway-related companies too remained in focus after the government approved Rs 8,349 crore investments on rail freight lines in three states. Finally, the BSE Sensex surged by 359.40 points or 1.41% to 25841.92, while the CNX Nifty soared by 110.95 points or 1.43% to 7842.75.