Markets to make a cautious start of the F&O expiry week

22 Aug 2016 Evaluate

The Indian markets declined in last session, paring some gains of previous trading, today the start of the F&O expiry week is likely to be cautious but in green on mixed regional cues but as the trade progress, traders will be getting some encouragement with the appointment of Urjit Patel, a known inflation warrior, as Raghuram Rajan’s successor at the Reserve Bank of India. Patel’s appointment is also an indirect acknowledgment of Raghuram Rajan’s work and legacy. The government is confident that Urjit Patel, will be "more balanced" in his approach to managing inflation and will be mindful of the need to push growth, considered critical for creating jobs. Global rating agency Moody's too has said that clean-up of India's banks is good for India's credit rating and it expects the process to continue under governor-designate Urjit Patel. Meanwhile, marketmen will also be getting some support with Francis Gurry, director-general at the World Intellectual Property Organization stating that India can break into the top-25 rank in the next 10 years. Also, Union Labour Minister Bandaru Dattatreya has said that EPFO will raise proportion of its investments in exchange traded funds (ETFs) from the present 5 per cent and a final decision on the quantum for current fiscal would be taken very soon. Some boost can also come with report that foreign investors have deployed over Rs 7,700 crore in the Indian stock market so far this month, driven by global and domestic factors. There will be some buzz in the aviation sector, on report that domestic air passenger traffic jumped by nearly 26 percent in July, registering double-digit growth for the 24th consecutive month with lower fares attracting more fliers. Local airlines flew 85.08 lakh passengers in July compared to 67.62 lakh fliers recorded in the year-ago period.

The US markets turned lower in last session despite positive economic data, as the traders remained concerned about the timing of interest rate hike by Federal Reserve. The Asian markets have made a mixed start, with some indices trading marginally in red, as hawkish comments from a Federal Reserve official boosted the likelihood of a US interest-rate increase this year.

Back home, Indian benchmarks failed to extend the gaining momentum on Friday as jittery investors chose to take some profits off the table amid hawkish comments from New York Fed President William Dudley and San Francisco Fed President John Williams over US interest-rate increases. Apart from the global concerns, markets also witnessed some disappointing developments on the domestic front which did not augur well with investor’s sentiments such as Indian rupee, which weakened for the second consecutive session against the US dollar. Market participants also remained cautious ahead of the announcement of a new governor for the Reserve Bank of India (RBI) expected anytime now. However, losses remained capped as Moody’s Investors Service retained India’s growth forecast at 7.5% for 2016 and stated that the outlook for emerging markets economies stabilized on account of the modest recovery in commodity prices, better capital flows and a better near-term outlook for growth in China. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 162.17 crore on August 18, 2016. Meanwhile, good buying was observed in selected metal stocks as India has slapped anti-dumping duty on certain cold-rolled flat steel products from four nations including China and South Korea to guard domestic industry from cheap imports. Oil producing majors also gained some traction after Brent crude topped $50 for the first time in six weeks as major producers prepared to discuss a possible output freeze. Further, many stock specific actions popup during the session like Coal India came under pressure after the reports that the government's proposed 5-10% stake-sale in the company and is likely to happen in Q4 of FY17. On the global front, Most Asian markets drifted lower on Friday, however, Japanese markets closed modestly higher. Back home, the local benchmark got off to a soft start as the indices showed signs of consolidation in early trade, amid weak Asian cues. Thereafter, the frontline indices oscillated in an extremely tight range through the morning session as market participants remained sideways in the absence of any significant trigger at domestic front. Finally, the BSE Sensex slumped by 46.44 points or 0.17% to 28077.00, while the CNX Nifty dropped 6.35 points or 0.07% to 8,666.90.

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