Markets to extend the gains with a positive start

The Indian markets extended their jubilation in the last session and posted gains of over half a percent. Today, the start is likely to remain good on supportive global cues and the markets will be taking some encouragement with the report that rain deficit has now been reduced to 6%, after a slow start. However, there will be some cautiousness too, with RBI Governor Raghuram Rajan, cautioning against expecting too much from central banks, stating that it is wrong on their part also to always claim a 'bazooka' left up their sleeves. Also, there are reports that Central trade unions are up in arms against a proposal to raise proportion of EPFO's investment in Exchange Trade Funds (ETFs) this fiscal. A proposal to increase proportion of EPFO’s investment in ETFs from 5 per cent of its investible deposits, will be taken up for discussion later in the week. There will be buzz in the fertilizer stocks, as the government has decided to reduce prices of key fertilisers like Diammonium Phosphate (DAP), Muriate of Potash (MOP) and Nitrogen Phosphate and Potash composition (NPK). The aviation stocks too may see some action, as the country will push to get 90 new airports up and running over the next 12 months, under a government plan to service smaller cities that have missed out on the country’s air travel boom. The PSU oil marketing companies will be under pressure, on reports that government may not cut excise duty on petrol and diesel in the near-term if it accepts the suggestions made in the approach paper submitted by Chief Economic Adviser for maintaining status quo when oil prices can climb by another $15 a barrel. 

The US markets posted modest gains in last session to make it a four days winning streak, as the traders were seem optimistic that the US economy will not be seriously hurt by the Brexit referendum. The Asian markets made an all green start and some of the indices are trading higher by over half a percent amid expectations that central banks in the world’s leading economies will add to monetary stimulus.

Back home, the Indian stock markets ended the first day of new F&O series on an optimistic note, on the back of bottom fishing in fundamentally strong shares gathering greater force. Sentiments remained buoyant across the board as the frontline indices registered strong back-to-back gains in last three trading sessions scaling beyond psychological levels. Investors got some confidence with the report that Indian manufacturing activity surged to a three-month high in June, driven by stronger demand, while the firms barely raised prices, leaving the door open for another rate cut by the central bank this year. The Nikkei/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 51.7 in June from May’s 50.7, its sixth month above the 50 mark that separates growth from contraction after it fell below that level in December for the first time in more than two years. On the monsoon front, the India Meteorological Department (IMD) stated that during the week ended June 29, monsoon rains were 1% above the long-term average. The June-September monsoon has remained 12 percent lower than average so far, but rains have covered almost the entire country, and helped quicken the planting process of summer crops such as rice, soybeans, cotton and pulses. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 1,107 crore on June 30, 2016. However, gains remained capped with the report that Infrastructure sectors grew at five-month low rate of 2.8 per cent in May, slipping from a four-year high of 8.5 per cent in previous month, as oil and natural gas output contracted. 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. On the global front, Asian stock markets ended mostly in green on Friday, while the European stock indices continued their post-Brexit recovery. Back home, the local benchmark 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. Finally, the BSE Sensex surged by 145.19 points or 0.54% to 27144.91, while the CNX Nifty rose 40.60 points or 0.49% to 8,328.35.