Markets to make a cautious but positive start ahead of RBI’s policy announcement

The Indian markets extended their jubilation in last session and the major benchmarks surged to their fresh 52 weeks high, as the government moved GST Bill in the Lok Sabha for discussions on amendments made by the Rajya Sabha. Today, the start of the crucial day is likely to be in green, as the Lok Sabha late last night unanimously passed the amendments to the GST Bill recommended by the Rajya Sabha, all 443 member present in the house voted in favour of the bill. Prime Minister Narendra Modi described GST as a “crucial step” towards ending tax terrorism besides reducing corruption and black money and said the new regime of indirect taxation will make consumer the “king”. Today, all eyes will be on the last monetary policy review by the outgoing RBI Governor Raghuram Rajan. Though, the expectations are that governor will leave interest rates unchanged, but traders will be eyeing his views on economy. The telecom stocks will be in action today, as the Telecom Department has announced that bidding rounds for the biggest-ever spectrum auction will begin from September 29. The sale will include mobile airwaves worth Rs 5.63 lakh crore at the base price value.

There will be lots of scrip specific action to keep the markets buzzing. Adani Ports, Lupin, UCO Bank, United Bank, TGBL, PFC, Adani Power, Apollo Tyres, Finolex Cables, Edelweiss and Godrej Properties, are among many to announce earnings during the day.

The US markets witnessed some weakness in the last session after the recent gains; amid speculation the Federal Reserve might raise interest rates after two months of strong jobs growth, while the trading activity remained subdued amid a lack of major US economic data. The Asian markets have made mostly a positive start on surge in crude prices, though the Chinese market was marginally in red, after surging to their one-year high in early deals after food price inflation softened slightly in July, while contraction in producer prices continued to decelerate. 

Back home, Monday’s trading session was of consolidation as the Indian frontline equity indices appeared a bit fatigued and kept moving in a range throughout the day. However, the benchmarks managed to extend the winning momentum for the third consecutive day of trade, as encouraging global developments buttressed domestic sentiments. Investors continued to build hefty positions across the board in early trades as sentiments got a boost after a stellar jobs report outstripped Wall Street expectations, showing sustained improvement in a labor market that has been spotty over the past few months. The US generated 255,000 new jobs in July, furnishing fresh proof that companies are still hiring plenty of workers even though the economy is operating at a lower pace. On the domestic front, sentiments got some support from Finance Minister Arun Jaitley’s statement that Indian economy has defied global slowdown and geo-political tensions, and is now poised to seize the opportunity to grow faster. The session largely remained characterized by choppiness as the aimless indices moved only sideways in a tight band amid lack of fresh triggers. Investors remained optimistic with the Moody's Investors Service’s report, terming the Indian government's targeting of inflation at four per cent with a range of plus/minus two per cent a 'credit positive' measure that will help macroeconomic stability.  According to Moody’s, sustained moderate inflation would contribute to macroeconomic stability and help prevent a repetition of the short marked cycles of the past.  Some support also came with a joint study by Confederation of Indian Industry (CII) and the Indian Banks' Association (IBA), stating that the overall financial conditions index in India rose 28 per cent sequentially to 61.1 percent in the first quarter of 2016-17 from 47.8 percent in the previous quarter of 2015-16, indicating healthy improvement.  Meanwhile, banking stocks gained traction ahead of the RBI policy review on August 09, 2016, while Auto shares extended their gains as the sector is likely to benefit the most, post the implementation of the GST Bill on the back of a lower effective tax rate. Moreover, Power stocks edged higher on the report that state power distribution companies have sharply reduced commercial losses and interest costs, giving a promising start to Power Minister Piyush Goyal's Uday scheme that aims to set right electricity distribution, the biggest bottleneck in the sector. On the global front, strong US jobs data sent Asian markets higher on Monday, while the European markets too displayed conviction. Back home, finally the BSE Sensex surged by 104.22 points or 0.37% to 28182.57, while the CNX Nifty rose by 28.20 points or 0.32% to 8,711.35.