Markets to get a cautious start on mixed regional cues

The Indian markets rallied in the last session and the major averages were able to reclaim some of their crucial psychological levels on broad based buying and short covering. Today, the start of the F&O series expiry day is likely to be cautious and volatility can be seen through the day, as the traders will be settling and rolling over positions to the next series. Traders will also be concerned with a private report of confidence among Indian businesses falling to a five month low in May. The Deutsche Boerses MNI India Business Sentiment Indicator, a gauge of current sentiment among BSE-listed companies, fell from 62.4 in April to 61.8 in May, lowest since December 2015. Also, the Securities and Exchange Board of India (Sebi) announced to put in place stringent norms for high-frequency trades along with higher penalties for misuse, initiate strong action against auditors for lapses and expressed hope that P-Note users will start directly investing in the Indian market. However, there will be some action in the capital goods sector stocks, as the Cabinet approved the first-ever policy for the capital goods sector in the country that aims to triple the value of production of these goods to Rs.7.5 lakh crore by 2025 and create more than 21 million jobs. Some buzz can be seen in the sugar stocks too, on report that the government is likely to put on hold the move to cut down or totally remove the 40 per cent excise duty on sugar import.

There will be lots of result announcements too, to keep the markets in action. ONGC, Union Bank, Jet Airways, India Cements, Tata Chemicals, JP Infratech, Mphasis, Natco Pharma, Neyveli Lignite and Novartis etc will be among the many to announce their numbers today.

The US markets extended the rally in last session with the Nasdaq and the S&P 500 reaching their best closing levels in about a month. Apart from the rise in crude oil prices news of “major breakthrough” in talks between Eurozone finance ministers and Greece to unlock 10.3 billion euros in new bailout loans lifted the markets higher. The Asian markets have made a mixed start and some of the indices are giving up modestly of their last session gains, though some have strengthened further as the crude traded above $50 a barrel for the first time since November.

Back home, Indian markets that have shown some signs of recovery in last session, went for a rally on Wednesday and the benchmarks after a gap-up start show remarkable performance, there was no sign of relenting throughout the session and bulls remained in command. It was broad based buying on positive global cues that led the major bourses reclaim some of their crucial psychological levels. The upbeat global environment gave traders a reason to cover their short positions just a day ahead of the May F&O series expiry. There were many factors that propelled the markets higher, one being the global brokerage houses upgrading Indian equities to “overweight” from “equal weight”, in a boost for investors they stated that India is becoming a low-beta market within the emerging markets basket. India's relative valuations as compared to emerging markets have come off. They also pointed that monsoon rainfall and passage of goods and services tax (GST) are the key triggers for the Indian markets. The other major factor to the day’s gains was private weather forecaster Skymet’s prediction of 'above normal' monsoon on the back of a warning announced by the Bureau of Meteorology (BoM), Australia. Skymet sees monsoon at 109 per cent of the long period average (LPA) of 887 mm for the four months from June to September, versus the initial estimate of 105 per cent. August rainfall is seen at 113 per cent and September at 123 per cent. Odds of a La Nina increase, boosting planting of rice, corn and oilseed crops. Australian Met Department’s report that the weather system that wreaked havoc in India, Asia and Africa has just ended and will now give way to bountiful rain in the form of La Nina. On the global front, after the rally in US markets the Asian markets followed the trend, while the European markets too made a strong start. Back home, the boisterous rally of the domestic market was in line with global markets and both the Sensex and Nifty ended at their highest closing levels in last one month. Markets after a strong start witnessed pick-up in buying activity in recently beaten down stocks. While there was surge in companies with big rural sales after the good monsoon prediction, the banking stocks remained the most jubilant ones from the beginning. Finally, the BSE Sensex surged by 575.70 points or 2.28% to 25881.17, while the CNX Nifty rallied by 186.05 points or 2.40% to 7934.90.