Markets to extend the gains with a positive start, tailing good global cues

The Indian markets surged in last session, with the major indices posting gains of around a percent, as traders resorted to broad based buying on some encouraging developments, marketmen also rejoiced the good progress of monsoon. Today, the start of the F&O series expiry day is likely to be strong. The hopes of rise in consumer demand with the government approving the proposals of Seventh Pay Commission will keep supporting the markets, though it has also raised concern of spike in inflation and meeting the fiscal deficit target. The cabinet has cleared the recommendations of the Commission according to which the overall hike in salary and allowance of central government employees and pensioners comes to 23.5 percent. Traders will also be getting some support with Parliamentary Affairs Minister Venkaiah Naidu’s statement that the government will seek to ensure that the bill on a pan-India goods and services tax (GST) will be passed in the upcoming session of parliament, scheduled from July 18 to August 12. Auto, consumer durables and FMCG sector stocks will continue to show upmove, while for the Auto companies especially the diesel vehicle makers, there will be additional cheer with the Supreme Court saying that it is considering lifting the ban on sale of these vehicles in the national capital region on payment of a green cess.  

The US markets extended their gaining streak in a post Brexit recovery, with the major averages further offsetting the sell-off. Traders largely shrugged off the Commerce Department report showing that personal income rose by slightly less than expected in May. The Asian markets have once again made a strong start, extending their gains along with currency, even though the crude prices fell.

Back home, Indian benchmark indices staged a blockbuster performance on Wednesday by vehemently surging close to a percent in the session, with auto and retail sector shares rallying after the government approved a long-awaited pay hike for its employees, while sentiment was also boosted by a global relief rally as the immediate impact of Brexit began to fade. Meanwhile, the union cabinet approved the recommendations of the Seventh Pay Commission, a move which will boost consumption by putting extra disposable income in the hands of the central government’s 4.7 million employees. Furthermore, metal and mining stocks also get some light after the Cabinet approved the National Mineral Exploration Policy (NMEP), which will pave the way for auction of 100 prospective mineral blocks, boosting India’s mining potential. Investors got some comfort with the Government’s assurances that it has enough support for passage of the GST bill in the Monsoon session of Parliament that will commence from July 18 till August 12. Also, Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR) stated that despite global uncertainties, banking sector issues, the economy stands out in terms of growth as compared to other emerging markets and the Indian financial system remains stable. Some support also came with the Economic Affairs Secretary Shaktikanta Das’ statement that India is posed for a “big leap” in growth which could touch 8 percent in the current fiscal on the back of normal monsoon. However, many large market patients remained cautious with the Morgan Stanley’s report that Brexit is likely to have an adverse impact on India's growth with domestic GDP expected to decline by up to 60 basis points in a high-stress scenario within the next two years. On the global front, Asian markets ended on firm note, while the European shares too rose. Back home, the local benchmarks got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. Thereafter, the frontline indices slowly but steadily started gathering steam and surged by over half a percent by late morning trades. The bourses further capitalized on the momentum and spurted in afternoon trades on the back of broad based bottom fishing in undervalued stocks. Finally, the BSE Sensex surged 215.84 points or 0.81% to 26740.39, while the CNX Nifty rose 76.15 points or 0.94% to 8,204.00.