Markets to extend gains on the first day of new series with a positive start

The Indian markets rallied in the last session, making a strong close of the June F&O series, with major averages gaining around two and half a percent for the series. Today, the start of the new series is likely to be in green on positive global cues and encouragement from World Bank’s statement that India is a bright spot. The World Bank president has said that he is pleased with the progress that's been made in six priority areas. He added that Prime Minister Modi and his entire Cabinet have set extremely difficult and important targets. However, there will be some cautiousness too, as the Core sector growth fell  sharply to a five-month low in May at 2.8% after hitting a 16-month high in April, indicating further softening in already weak industrial activity. Also, there are reports that India and Cyprus are poised to ink a new tax treaty which, like in the case of a similar deal with Mauritius, shuts the door on investors using the country’s tax loopholes to avoid paying taxes in India. There will be some buzz in the PSU oil marketing stocks, as the Petrol price has been cut by 89 paise a litre and diesel by 49 paise a litre, the first decrease in rates in two months.

The US markets surged in last session, extending their rally mood for the third straight day after Bank of England Governor Mark Carney hinted at providing further stimulus and traders largely shrugged off a Labor Department report showing that initial jobless claims rose by slightly more than expected. The Asian markets have made mostly a positive start, heading for the weekly gains and limiting the fallout from the UK’s decision to leave the European Union, though a private gauge of China’s manufacturing industry unexpectedly fell. 

Back home, the June series futures and options contract expiry turned out to be a jubilant session for the Indian frontline equity indices as they managed to settle with gains of around a percent, with worries over the impact of the Britain's decision to leave the European Union known as Brexit receded. Investors remained optimistic for most part of the session with the report that implementation of the much-awaited pay hike for over 1 crore central government employees and pensioners will be a positive for the economy as it will push up consumption and its impact on inflation is likely to be moderate.  The Cabinet has cleared the recommendations of the 7th Pay Commission according to which the overall hike in salary and allowance of central government employees and pensioners comes to 23.5 per cent. Besides, appreciation in Indian rupee against the dollar too aided sentiments. Indian rupee firmed up by 15 paise to 67.52 against the dollar at the time of equity markets closing, following sustained selling of the US currency by exporters and banks. Some support also came with Finance Minister Arun Jaitley’s statement that the Non Performing Assets (NPA) situation is under control as the economic conditions are showing signs of improvement. He pointed to some factors mentioned in the FSR including the numbers of declining weak companies and the number of stressed companies deleveraging quite fast. Meanwhile, after disappointing on first half of June, Monsoon have gathered pace in second half of the month, leading to significant drop in countrywide rainfall deficiency. As on June 29, the countrywide cumulative rainfall deficiency stands at 12%, which had once mounted to 25% earlier. On the global front, Asian markets closed mostly higher, while European shares too rose in early deals. Back home, the benchmark started the day on an optimistic note tracking the Asian peers which traded mostly in the green following the upbeat overnight cues from the Wall Street where banks and other financial companies led another broad surge. The frontline indices soon gathered momentum and traded with over a percent gains. Finally, the BSE Sensex surged 259.33 points or 0.97% to 26999.72, while the CNX Nifty rose 83.75 points or 1.02% to 8,287.75.