Markets to make a positive start of the F&O expiry week

The Indian markets managed to end green in the last session coming out of great volatility. Today, the start of the holiday truncated F&O expiry week is likely to be positive and traders will now be eyeing the winter session of Parliament, which will commence from Thursday for next trigger. Traders will continue to get support from the recommendations of the Seventh Pay Commission which is expected to generate around Rs 1 lakh crore of stimulus for consumption demand in India. Traders will also get some encouragement with former governor of RBI C Rangarajan’s statement that Indian economy will slightly perform better this year as the productivity level of capital may remain high. Though the growth rate of economy will be somewhere around 7.5 percent, the productivity of capital is less than investment growth and should catch up. However, there will be some concern too, on reports that overseas investors have pulled out more than $1billion from the Indian capital markets since the beginning of the month due to lacklustre quarterly earnings and concerns over a possible rate hike by the US Federal Reserve. Also, expressing concern over slowdown in the pace of reforms, global rating agency Standard & Poor's has said that India's rating could come under stress if government fails to pursue reforms agenda and overshoots fiscal deficit target. It has ruled out a rating upgrade for the country in the next 12-18 months but said that in case the government is able to get the Goods and Services Tax (GST) bill passed in the forthcoming Winter Session of Parliament, it would be a credit positive.Export oriented stocks will be in action, as India and the European Union (EU) have decided to re-start talks on a bilateral free trade agreement early next year.

The US markets made a positive close in last session, despite paring some of their gains, traders were though encouraged by more dovish comments from European Central Bank President Mario Draghi. The Asian markets have made mostly a positive start and were trading modestly in green despite underperformance of the materials shares across the region. The Chinese market was fluctuating with stricter margin requirements coming into force.

Back home, Indian equity benchmarks ended the volatile day of trade with marginal gains on Friday. Markets after a weak opening, recovered in style to trade jubilantly for most part of the day, but a sharp wave of selling, which emerged in last leg of trade, dragged the key gauges near the neutral lines. Sentiments remained up-beat with Finance Minister Arun Jaitley vowing a corruption-free governance, reasonable tax rates and non-discretionary allotment of natural resources to make it easier for companies to do business in India. However, markets suffered profit taking in last leg of trade led by selling in banking counter, as the Reserve Bank of India (RBI) has thrown open the doors for mergers and acquisitions in the banking industry by signaling that it is open to persons owning more than 10 percent stake in a bank. The central bank has said that it could permit promoters, or investors to own more than 10 per cent if the applicant meets certain conditions including if ‘it is in public interest’ and in the desirability of diversified ownership. Investors also remained concerned with the RBI governor Raghuram Rajan’s statement that the drop in public and private investments was the main concerns about the country’s economic growth. RBI has cut its growth forecast for the current fiscal year to 7.4% from 7.6% previously, well below the government's target of 8 to 8.5%. On the global front, European markets, after a positive start, entered into red terrain, however, Asian markets ended mostly in green. Back home, Seventh Pay Commission recommended 23.5 per cent overall hike in central government employees and pensioners remuneration, which is likely to boost consumption and is seen as stimulus for the economy. Though, the pay hike will cost the government over Rs 1 lakh crore in the first year but 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. Appreciation in Indian rupee provided some support to the markets. Finally, the BSE Sensex gained 26.57 points or 0.10% to 25868.49, while the CNX Nifty added by 13.80 points or 0.18 % to 7856.55.